Prospectus
for the initial public offering
of
1,000,000 no par value ordinary bearer shares (Inhaberaktien),
resulting from a capital increase against contribution in cash to be resolved by an
extraordinary shareholders meeting (Hauptversammlung) of the Company
and at the same time for the
admission to trading in the regulated market (regulierter Markt) (General Standard)
of the Frankfurt Stock Exchange
of
6,403,007 no par value ordinary bearer shares (Inhaberaktien)
and
up to 1,000,000 no par value ordinary bearer shares (Inhaberaktien),
resulting from a capital increase against contribution in cash to be resolved by an
extraordinary shareholders meeting (Hauptversammlung) of the Company
each such share with a nominal value of EUR 1.00 in the share capital and with full
dividend rights as from January 1, 2013
of
Pacific Retail Merchants AG
Germany
International Securities Identification Number (ISIN): DE000A1PHEF0
German Securities Identification Number (WKN): A1PHEF
Ticker Symbol: 7PR
Date of Prospectus: 18 March 2013
(This page intentionally left blank.)
2
Table of Contents
SUMMARY OF THE PROSPECTUS ................................................................................................. 6
A. INTRODUCTION AND W ARNINGS ................................................................................................. 6
B. THE ISSUER .............................................................................................................................. 7
C. SECURITIES ........................................................................................................................... 21
D. RISKS .................................................................................................................................... 22
E. OFFER ................................................................................................................................... 25
ZUSAMMENFASSUNG DES PROSPEKTS ................................................................................... 29
A. EINLEITUNG UND W ARNHINWEISE ............................................................................................ 29
B. EMITTENT ............................................................................................................................... 30
C. W ERTPAPIERE ........................................................................................................................ 46
D. RISIKEN ................................................................................................................................. 47
E. ANGEBOT ............................................................................................................................... 50
RISK FACTORS RELATED TO PACIFIC RETAIL MERCHANTS AG AND ITS SUBSIDIARIES 54
RISKS RELATED TO PRM GROUP’S BUSINESS ................................................................................. 54
RISKS RELATED TO THE OFFERING .................................................................................................. 61
GENERAL INFORMATION ............................................................................................................. 65
Responsibility for the Content of the Prospectus....................................................................................................... 65
Subject Matter of this Prospectus ............................................................................................................................. 65
Forward-Looking Statements.................................................................................................................................... 65
Information Derived from Third Parties ..................................................................................................................... 66
Documents Available for Inspection .......................................................................................................................... 67
Notes Regarding Financial and Currency Data ......................................................................................................... 67
Auditors .................................................................................................................................................................... 67
THE OFFERING ............................................................................................................................... 69
SUBJECT MATTER OF THE OFFERING............................................................................................... 69
TIMETABLE FOR THE OFFERING ....................................................................................................... 69
PRICE RANGE, OFFER PERIOD, OFFER PRICE, AND ALLOTMENT ....................................................... 70
GENERAL ALLOTMENT CRITERIA ..................................................................................................... 70
DELIVERY AND SETTLEMENT OF THE OFFER SHARES ....................................................................... 71
STABILIZATION MEASURES .............................................................................................................. 71
GENERAL AND SPECIFIC INFORMATION ON THE SHARES ................................................................... 71
SELLING RESTRICTIONS (LOCK-UP) ................................................................................................ 72
ADMISSION TO TRADING ................................................................................................................. 72
REASONS FOR THE OFFERING, USE OF PROCEEDS, COSTS AND INTERESTS OF THIRD
PARTIES INVOLVED IN THE OFFERING ...................................................................................... 72
REASONS FOR THE OFFERING ......................................................................................................... 72
USE OF PROCEEDS AND COSTS ...................................................................................................... 73
SHAREHOLDER STRUCTURE ...................................................................................................... 73
SHAREHOLDER STRUCTURE PRIOR TO THE OFFERING ..................................................................... 73
SHAREHOLDER STRUCTURE AS OF THE OFFERING ........................................................................... 75
DIVIDEND POLICY AND EARNINGS PER SHARE ....................................................................... 76
GENERAL PROVISIONS RELATING TO PROFIT ALLOCATION AND DIVIDEND PAYMENTS ........................ 76
DIVIDEND POLICY ........................................................................................................................... 76
EARNINGS PER SHARE: ................................................................................................................... 77
CAPITALISATION AND INDEBTEDNESS ..................................................................................... 78
SELECTED FINANCIAL INFORMATION ....................................................................................... 80
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS ............................................................................................................................ 85
OTHER OPERATING EXPENSES ........................................................................................................ 85
INCOME TAX ................................................................................................................................... 85
CURRENT ASSETS .......................................................................................................................... 85
CASH AND CASH EQUIVALENTS ........................................................................................................ 85
ADVANCE PAYMENTS ...................................................................................................................... 85
PROVISIONS ................................................................................................................................... 86
CURRENT AND DEFERRED INCOME TAX ............................................................................................ 86
3
SHARE CAPITAL .............................................................................................................................. 86
SUBSCRIBED CAPITAL..................................................................................................................... 86
AUTHORIZED CAPITAL..................................................................................................................... 87
LIABILITIES ..................................................................................................................................... 87
FINANCIAL RISK MANAGEMENT......................................................................................................... 87
Overview .................................................................................................................................................................. 87
Business Overview ................................................................................................................................................... 88
Revenues ................................................................................................................................................................. 91
Cost of Sales ............................................................................................................................................................ 93
Gross Profit Margin .................................................................................................................................................. 93
Other Income ........................................................................................................................................................... 93
Selling and Distribution Expenses and Administrative Expenses .............................................................................. 93
Income Tax Expense ................................................................................................................................................ 93
Balance Sheet Data ................................................................................................................................................. 94
Non-Current Assets .................................................................................................................................................. 95
Equity ....................................................................................................................................................................... 95
Current Liabilities...................................................................................................................................................... 95
Liquidity .................................................................................................................................................................... 96
Net Cash Flow Generated from Operating Activities ................................................................................................. 98
Net Cash Flow Generated from Investing Activities .................................................................................................. 98
Net Cash Flow Used in Financing Activities .............................................................................................................. 98
Cash and Bank Balance at End of Financial Year..................................................................................................... 98
Off-Balance Sheet and Other Arrangements ............................................................................................................ 98
Critical Accounting Policies....................................................................................................................................... 98
Industry Overview .......................................................................................................................... 99
Market Opportunity ................................................................................................................................................... 99
Dried Seafood Sector ............................................................................................................................................. 100
Traditional Chinese and Western Medicine............................................................................................................. 100
Competitive Overview............................................................................................................................................. 101
Business Overview ...................................................................................................................... 102
PRM’S STRENGTHS ..................................................................................................................... 106
STRATEGY ................................................................................................................................... 107
BUSINESS MODEL ........................................................................................................................ 109
THE COMPANY’S BRAND AND PRODUCTS ...................................................................................... 110
SALES AND DISTRIBUTION ............................................................................................................. 111
INTELLECTUAL PROPERTY ............................................................................................................. 111
Trademarks ............................................................................................................................................................ 111
Domain Names....................................................................................................................................................... 113
EMPLOYEES ................................................................................................................................. 114
Number of Employees ............................................................................................................................................ 114
Training .................................................................................................................................................................. 115
General Overview on Labor Contract...................................................................................................................... 115
Remuneration, social security and housing fund ..................................................................................................... 115
INSURANCE .................................................................................................................................. 118
INVESTMENTS............................................................................................................................... 119
AWARDS AND RECOGNITIONS........................................................................................................ 120
LEGAL PROCEEDINGS ................................................................................................................... 120
MATERIAL CONTRACTS ................................................................................................................. 120
GENERAL INFORMATION ON THE COMPANY ......................................................................... 121
FORMATION, BUSINESS NAME, REGISTERED OFFICE, FINANCIAL YEAR AND TERM OF THE COMPANY 121
BUSINESS PURPOSE OF THE COMPANY ......................................................................................... 124
GROUP STRUCTURE AND RECENT CORPORATE RESTRUCTURING OF THE PRM .............................. 125
NOTICES ...................................................................................................................................... 131
PAYING AND DEPOSITARY AGENT .................................................................................................. 131
INFORMATION ON THE SHARE CAPITAL OF PRM AND APPLICABLE PROVISIONS ......... 132
SHARE CAPITAL ........................................................................................................................... 132
GENERAL PROVISIONS RELATING TO THE LIQUIDATION OF THE COMPANY ....................................... 132
GENERAL PROVISIONS GOVERNING CHANGES IN SHARE CAPITAL .................................................. 132
GENERAL PROVISIONS RELATING TO PRE-EMPTIVE RIGHTS (SUBSCRIPTION RIGHTS) ..................... 133
SQUEEZE-OUT OF MINORITY SHAREHOLDERS AND INTEGRATION .................................................... 133
REPORTING AND NOTIFICATION REQUIREMENTS IN RELATION TO SHARE OWNERSHIPS ................... 133
CORPORATE BODIES AND MANAGEMENT ............................................................................. 134
GENERAL ..................................................................................................................................... 134
MANAGEMENT BOARD .................................................................................................................. 135
CERTAIN INFORMATION ON THE MEMBERS OF THE MANAGEMENT BOARD ........................................ 137
SUPERVISORY BOARD .................................................................................................................. 137
4
CERTAIN INFORMATION ON THE MEMBERS OF THE SUPERVISORY BOARD ........................................ 139
SHAREHOLDERS’ GENERAL MEETING ............................................................................................ 139
CORPORATE GOVERNANCE CODE DECLARATION ........................................................................... 140
RELATED PARTY TRANSACTIONS............................................................................................ 140
GENERAL ..................................................................................................................................... 140
TAXATION IN GERMANY ............................................................................................................. 143
TAXATION OF THE COMPANY ......................................................................................................... 143
TAXATION OF SHAREHOLDERS ...................................................................................................... 144
TAXATION OF DIVIDENDS .............................................................................................................. 145
TAXATION OF CAPITAL GAINS ........................................................................................................ 147
TAXATION IN THE UK .................................................................................................................. 150
LISTING AGREEMENT ................................................................................................................. 152
RECENT DEVELOPMENTS AND OUTLOOK .............................................................................. 153
REGULATORY ENVIRONMENT................................................................................................... 153
FINANCIAL SECTION ..................................................................................................................... F1
GLOSSARY .....................................................................................................................................G1
SIGNATURE .................................................................................................................................... S1
5
SUMMARY OF THE PROSPECTUS
Summaries are made up of disclosure requirements known as ‘Elements’. These Elements are
numbered in Sections A - E (A.1 - E.7). This summary contains all the Elements required to be
included in a summary for this type of securities and issuer. Because some Elements must not be
addressed, there may be gaps in the numbering sequence of the Elements. Even though an
Element may be required to be inserted in the summary because of the type of securities and
issuer, it is possible that no relevant information can be given regarding the Element. In this case a
short description of the Element is included in the summary with the mention of ‘‘not applicable’’.
A.
A.1
Introduction and Warnings
Introduction
and
warnings.
This summary should be read as an introduction to the Prospectus.
Any decision to invest in the securities of the Company should be based on
consideration of the Prospectus as a whole by the investor.
Where a claim relating to the information contained in this Prospectus is brought
before a court, the plaintiff investor might, under the respective national legislation
of the relevant member state of the European Economic Area have to bear the
costs for translating the Prospectus before legal proceedings are initiated.
Pacific Retail Merchants AG registered with the commercial register of the local
court of Munich under HRB 198381 and its business address at Rosenheimer Str.
145e, 81671 Munich, Germany (the “Company” or “PRM”, together with its direct
and indirect subsidiaries, the “PRM Group”) and VEM Aktienbank AG, with its
registered office at Prannerstraße 8, 80333 Munich, Germany (“Bank” or “VEM”) as
applicants for the admission of the Company’s securities for trading assume
responsibility for the contents of this summary pursuant to Section 5 (2b) No. 4 of
the German Securities Prospectus Act (Wertpapierprospektgesetz) including its
German translation contained in this Prospectus. They can be held liable for the
contents of the summary, however only in the event that the summary is misleading,
inaccurate or inconsistent when read in conjunction with other parts of the
Prospectus or does not provide, when read in conjunction with the other parts of the
Prospectus, all required key information in order to help investors when considering
whether to invest in the shares of the Company.
In case of this summary to be misleading, incorrect or contradictory if read in
conjunction with other parts of this Prospectus or if the summary does not contain
all key information if read in conjunction with other parts of this Prospectus, PRM
and VEM can be held liable. Neither the Company nor the Bank are required by law
to update this Prospectus.
A.2

Consent by the issuer or
person
responsible
for
drawing up the Prospectus
to
the
use
of
the
Prospectus for subsequent
resale or final placement of
securities
by
financial
intermediaries.

as the Offer is conducted
solely and exclusively by
the Company, there will be
no selling agents for the
Offer.

Indication of the offer period
within which subsequent
resale or final placement of

Not applicable, as there will
be no financial
6
securities
by
financial
intermediaries can be made
and for which consent to
use the Prospectus is
given.
B.
intermediary.

Any
other
clear
and
objective
conditions
attached to the consent,
which are relevant for the
use of the Prospectus.

Not applicable,
will
be
no
intermediary.

Notice in bold informing
investors that information
on the terms and conditions
of the offer by any financial
intermediary is to be
provided at the time of the
offer by the financial
intermediary.

In the event of an offer
being made by a financial
intermediary, such financial
intermediary will provide
information to investors on
the terms and conditions of
the offer at the time the
offer is made.
as there
financial
The Issuer
B.1 Legal and
commercial
name
As of the date of this Prospectus, the Company’s legal name is Pacific Retail
Merchants AG.
The Company operates solely as a financial and management holding company for
the PRM Group. PRM Group’s operating subsidiaries which are held by the 100%
subsidiary of the Company, Giant Luxury Holdings Limited (“Giant Luxury”), use
other commercial names, such as ‘Hing Lung Medicine”, “Universal Medicine”, “Dah
Sing Bird Nest”, “Yue York Medicine”, “Giant King Medicine”,
“Giant Royal
Medicine”, “Giant Top Medicine”, “Giant Ocean Medicine”, “Giant Emperor
Medicine”, “Giant Channel Medicine”, “Giant Dragon” and “GL IIXII”.
As at the date of this Prospectus, PRM sells all of its dried seafood, herbal medicine
and health supplements in shops run under its brand “Shang Yu Tang”.
B.2
B.3
Domicile,
legal form,
legislation,
country of
incorporation.
The Company has its registered office at Rosenheimer Str. 145e, 81761 Munich,
Germany.
Description
of, and key
factors
relating to,
the nature
of the
issuer’s
current
operations
and
principal
The PRM Group comprises the following companies: Pacific Retail Merchants AG,
the holding company based in Munich, Germany, and a sub-holding named Giant
Luxury Holdings Ltd. which is based in Hong Kong as well as the operating
companies Hing Lung Medicine Company Limited, Universal Medicine Company
Limited, Dah Sing Bird Nest Store Limited, Yue York Medicine Group Limited, Giant
King Medicine Limited, Giant Royal Medicine Limited, Giant Top Medicine Limited,
Giant Ocean Medicine Limited, Giant Channel Medicine Limited, Giant Emperor
Medicine Limited, Giant Dragon (China) Limited and GL IIXII Limited (“Operating
Subsidiaries”); all Operating Subsidiaries are all located in Hong Kong and
established under the laws of Hong Kong.
The Company’s registration is at the commercial register of the local court of
Munich under the docket number HRB 198381.
The Company is a stock corporation (Aktiengesellschaft) incorporated in the
Federal Republic of Germany and governed by the laws of the Federal Republic of
Germany.
7
activities,
stating the
main
categories
of products
sold and/or
services
performed
and identification of
the
principal
markets in
which the
issuer
competes.
Business overview
PRM Group sells a variety of dried seafood and other traditional Chinese delicacies,
medicines and health supplements through its network of Company-owned stores
operating under the name Shang Yu Tang. The Company also sells a variety of
personal care products, over-the-counter (OTC) medicines and health supplements
for both retail and wholesale customers.
Hong Kong provides the PRM Group with an ideal environment to participate in the
dried delicacies market. Logistically, Hong Kong’s position as an import/export
gateway to the east provides the Company with broad access to purveyors of dried
seafood from around the world.
Key Products and Services
Dried delicacies such as abalone, fish maw, edible bird’s nest, sea cucumber and
Cordyceps among others are considered prestigious in traditional Chinese culture.
Following is an overview of the Company’s most popular dried delicacy products,
most of them are either considered luxury items and are traditionally reserved for
special occasions such as weddings and other celebrations or are used in Chinese
herbal medicines .

Dried Abalone
Abalone has long been a valuable food source for traditional Chinese dishes.

Sea Cucumber
Sea Cucumber is a gelatinous aquatic creature, which is thought to contain rare and
healthy minerals.

Ginseng Root
Dried Asian ginseng roots are an ingredient in herbal remedies for hundreds of
years.

Shark’s Fin
Shark’s fin soup considered to be a luxury item in Chinese culture and seen as a
symbol of wealth, power and prestige.

Fish maw
Fish maw is an internal organ, common ingredient in Chinese cooking, primarily
being used in soups.

Edible Bird's Nest
Edible bird's nests are nests of swallows, constructed with salivary glue, containing
several organic nutrients .

Cordyceps
Cordyceps, also referred to as caterpillar fungus, has a long history as medicinal
fungi.
Main Markets of the Company
8
The Company is exclusively active in the Special Administration Region of China,
Hong Kong. It benefits from the increasing number of Mainland Chinese tourists
seeking to buy the exclusive and traditional ingredients of the Chinese cuisine or
medicine.
B.4
a.
Description of the
most significant
recent
trends
affecting
the
issuer and the
industries
in
which it operates
As a Special Administrative Region (SAR) of China, Hong Kong’s growth is tied to
that of China.
Households in both Hong Kong and the People’s Republic of China, (“PRC“) have
continued to enjoy higher levels of disposable income and with the rise in affluence
comes an increase in ability to purchase products of higher quality. PRM expects
the demand for dried seafood, herbal medicine and health supplement products to
grow, as target consumers shift to spend more money on luxurious food and
ingredients.
In recent months the Company has seen an increase in the number of customers at
its stores, and store sales. This trend, the Company believes is partially a result of
the improvement of China's economy. This improvement of China's economic
activity is partly due to China's most recently announced economic stimulus
program implemented by the Chinese government in September 2012.
B.5
Description
of the
Group and
the issuer’s
position
within the
Group
The PRM Group comprises the following companies: Pacific Retail Merchants AG,
the holding company based in Munich, Germany, and a sub-holding named Giant
Luxury Holdings Ltd. which is based in Hong Kong as well as the Operating
Subsidiaries Hing Lung Medicine Company Limited, Universal Medicine Company
Limited, Dah Sing Bird Nest Store Limited, Yue York Medicine Group Limited, Giant
King Medicine Limited, Giant Royal Medicine Limited, Giant Top Medicine Limited,
Giant Ocean Medicine Limited, Giant Channel Medicine Limited, Giant Emperor
Medicine Limited, Giant Dragon (China) Limited and GL IIXII Limited; all Operating
Subsidiaries are located in Hong Kong and established under the laws of Hong
Kong.
B.6
Persons
who,
directly or
indirectly,
have an
interest in
the issuer’s
capital or
voting
rights or
have
control over
the issuer
Prior to completion of the offering, Mr. Chung Wing Chin as member of the
management board of the Company holds approximately 20,91 % of all ordinary
registered shares with no par value outstanding and currently issued by the
Company and is the largest shareholder of the Company. No shareholder has
sufficient voting rights that would provide him with a blocking minority
(Sperrminorität).
Voting
Rights
Each of the shares of the Company entitles the shareholder to one vote at the
general shareholders’ meeting of the Company. There are no restrictions on voting
rights. Voting rights are the same for all of the Company’s shareholders.
The shareholders of PRM immediately prior to the implementation of the Offering
(the “Existing Shareholders”) are set out in the table below:
9
Person
holding a
direct or
indirect
interest in
the Issuer’s
capital or
voting
rights
which is
notifiable
under the
Issuer
national
law,
together
with the
amount of
each such
person’s
interest.
Existing Shareholders
Number of shares
Percentage
of shares (in
%)
Chung Wing Chin
1,290,559
20.15
Sunever Group Ltd.
593,505
9.27
Wong Man Keung
589,086
9.20
Lui Kam Fei
330,848
5.17
Lai Zhi Yan
314,432
4.91
Yuen Ho Pan
310,643
4.89
Alright International Holdings, Ltd.
308,749
4.82
Wong Siu Lai
303,067
4.73
Wong Yim Ling
303,067
4.73
Aggressive Resources Ltd.
212,147
3.31
Wong Hon Leong
212,147
3.31
Freefloat3
3,653,009
56,21
Total4
6,403,007
100
1)
2)
3)
4)
Mr. Chung Wing Chin is a citizen of Hong Kong and a member of the board of the Company. As of
the date of this Prospectus, is the largest shareholder of the Company.
Sunever Group Ltd. is a company incorporated in Hong Kong and is controlled by its sole
shareholder Mr. Wong Wai Keung, who is also a member of the board of the Company.
Freefloat according to the definition of the Frankfurt Stock Exchange, i.e. all shareholdings in the
company greater than 5%.
Totals do not add up to 100% of the shareholdings reflected above.
Upon completion of the Offering, Mr. Chung Win Chin will continue to hold at least
17.43% of the Company’s share capital (assuming placement of all Offer Shares as
defined below under E.3).
Whether the
Issuer’s
shareholders
have
different
voting
Existing Shareholders of the Company do not have different voting rights.
10
rights, if
any
Whether the
Issuer is
directly or
indirectly
owned or
controlled
and by
whom and
description
of the
nature of
such
control
B.7
Selected
financial
and
business
information
The Company is neither directly nor indirectly controlled by any shareholder.
The Company was founded on 8 February 2012 as a shelf-company and registered
in the commercial register of the local court of Munich (Amtsgericht München) on 24
April 2012.
The operational business of PRM is exclusively carried out by Giant Luxury
Holdings Ltd., Hong Kong and the twelve Operating Subsidiaries Hing Lung
Medicine Company Limited, Universal Medicine Company Limited, Dah Sing Bird
Nest Store Limited, Yue York Medicine Group Limited, Giant King Medicine Limited,
Giant Royal Medicine Limited, Giant Top Medicine Limited, Giant Ocean Medicine
Limited, Giant Channel Medicine Limited, Giant Emperor Medicine Limited, Giant
Dragon (China) Limited, GL IIXII Limited. The sole shareholder of Giant Luxury
Holdings Ltd is the Company, which is acting as a financial holding.
In order to present the business, financial condition and results of operations of
PRM historically, in the following, the financial data is used from Giant Luxury. The
audited annual consolidated financial statements of Giant Luxury as at and for the
years ending 30 September 2012, 30 September 2011 and 30 September 2010
have been established under IFRS. These financial statements have been prepared
by Giant Luxury for the purpose of the Offering. The purpose of this form of financial
statements is to put the investor in the position to better compare the development
of the business, financial condition and the results of operations of Giant Luxury and
PRM over the periods of the past three years.
The above-mentioned audited financial statements were audited by HKCMCPA
Company Ltd., certified public accountants, Hong Kong.
The interim financial statements as of 30 September 2012 of Pacific Retail
Merchants AG were audited by VEDA WP GmbH Wirtschaftsprüfungsgesellschaft,
München. VEDA WP GmbH Wirtschaftsprüfungsgesellschaft is a member of the
German Chamber of Auditors (WPK).
The following selected financial information which is reflected in this section, has
been extracted from the audited financial statements of Giant Luxury Holdings, Ltd.,
unless expressly stated otherwise.
The following figures were subject to rounding adjustments that were carried out
according to established commercial standards. As a result, the figures stated in the
table may not exactly add up to the total values that may also be stated in the table.
11
Giant Luxury Holdings Ltd.:
1 October - 30 September
2010
2012
2011
(in EUR thousand)
(audited)
Selected Income Statement Data
Revenues
2,834
6,856
Cost of sales
(1,527)
(4,172)
Gross profit
1,307
2,684
Other income
0
0
Selling and
(1,073)
(1,728)
distribution
expenses
Administrative and
(153)
other expenses
(438)
Finance Costs
(2)
(3)
Profit before
79
515
taxation
Income tax
(17)
(115)
expense
Net profit
62
400
Selected Cash
Flow Data
Profit before
79
515
taxation
Net cash generated
111
147
from operating
activities
Net cash used in
(78)
(137)
investing activities
Net cash used in
26
25
financing activities
Net increase in
59
35
cash and bank
balances
Cash and bank
175
210
balances at end of
financial year
10,889
(5,763)
5,126
19
(2,488)
(1,333)
(47)
1,277
(221)
1,055
1,277
(2,075)
(135)
2,483
262
488
30 September
2010
2011
2012
(in EUR thousand)
(audited)
Selected Balance Sheet Data
Non-current assets
105
188
881
Current assets
1,517
3,215
7,740
Total assets
1,622
3,403
8,621
Current liabilities
1,505
2,888
5,293
Total liabilities
1,524
2,896
6,482
Capital and
reserves
Total equity and
liabilities
98
507
2,139
1,622
3,403
8,621
12
Other selected Financial Data
EBIT2
81
518
30 September
2010
(unaudited)1
Other selected Financial Data
EBIT margin3 in %
2,84
Net profit margin4
2,19
in %
Number of
17
employees5
1,324
2011
2012
7,56
5,83
12,16
9,69
39
78
1) "Other Selected Financial Data" is unaudited and has been calculated
based on information derived from the audited Historical Consolidated
Financial Statements of Giant Luxury Holdings Ltd. and is taken from the
internal management accounts of Giant Luxury Holdings Ltd..
2) Profit before taxation plus interest expense
3) EBIT divided by revenues multiplied by 100
4) Net profit for the period divided by revenues multiplied by 100
5) Average numbers of the financial period. Audited information for the period 2010-2012.
Pacific Retail Merchants AG:
The following figures show the first interim financial year of Pacific Retail Merchants
AG from 24 April 2012 - 30 September 2012. There are no existing comparative
figures for previous years. Als wesentliches Ereignis nach dem Stichtag des
Zwischenabschlusses ist anzumerken, dass mit Datum vom 6. Dezember 2012
sämtliche Anteile an der Giant Luxury Holdings Ltd., Hong Kong im Rahmen einer
Kapitalerhöhung gegen Sacheinlagen in die Pacific Retail Merchants AG, München
eingebracht wurden.
(in EUR thousand)
(audited)
Selected Income
Statement Data
24.4.2012-30.09.2012
Administrative expenses
(7)
deferred taxes
2
loss of the period
(5)
Selected Cash Flow Data
loss of the period
(5)
Operating profit before
working capital changes
(5)
Net Cash generated from
operating activities
2
Net cash used in investing
actvities
38
13
Net cash used in financing
activities
0
Net increase in cash and
bank balances
35
Cash and bank balances
48
(in EUR thousand)
(audited)
30.09.2012
24.04.2012
Non-current assets
173
0
Current assets
503
13
Total assets
223
13
Current liabilities
178
0
Total liabilities
178
0
Capital and reserves
45
13
Total equity and
liabilities
223
13
Selected Balance Sheet
Data
As of 30 September 2012 the Company had no employees. As the Company had
no revenues in the financial period between 24 April 2012 and 30 September 2012,
no further data is illustrated at this point.
14
Significant
changes to the
issuer’s financial
condition and
operating results
Revenues
Revenues increased from TEUR 2,834 in the financial year 2010, to TEUR
6,856, up TEUR 4,022 or 142% in fiscal 2011. Revenues for 2012 were
TEUR 10,889, an increase of 59% compared to the fiscal year 2011. The
increase in revenue during the fiscal years 2010 and 2011, is primarily
attributed to the addition of new stores to the network and an increase in
sales in existing stores. Revenue increases in 2012 largely reflects the
increase in wholesale sales.
Revenue Breakdown by Product Type
The following table provides a breakdown of total revenues categorized by
retail and wholesale for each of the fiscal years ended 30 September 2010,
30 September 2011, and 30 September 2012. The second table presents
revenues in categories as a percent of total sales and the gross profit within
each category as at 30 September 2012.
Breakdown of revenues
01.10.2011
to
30.09.2012
01.10.20.10
to
30.09.2011
01.10.2009
to
30.09.2010
Revenue from:
− Wholesale
business
− Retail buisness
Category
4.343.385
6,546,074
10,889,459
1,357,021
5,499,147
6,856,168
Percent of Total
Category
Sales
Gross
471.240
2,363,037
2,834,277
Profit1
Wholesale
39%
20%
Dried Seafood
34%
46%
Chinese Herbal Medicine
7%
49%
Chinese Supplements
13%
50%
Daily Personal Care Products
7%
14%
1this
column presents the gross profit within each category and must not be added up
Cost of Sales
Cost of sales comprise of inventory, freight charges and direct labor. The
following table shows a breakdown of cost of sales for the years under audit
for each category. The table also presents cost of sales as a percentage of
total cost of sales for the years under audit.
15
Cost of Sales For the years ended September 30
(Euros)
2012
Cost of Inventories sold
Freight charges
Direct labor
Total
Percent of total sales
2011
2010
5,703.666
4,148,648
1,515,612
56,979
22,748
6,465
2,768
904
5,102
5,763,413
4,172,300
1,527,179
53%
60%
53%
The increase in cost of goods as a percent of sales from 2010 to 2011
reflects the building of inventory. The decline in Cost of Goods as a
percentage of sales during fiscal 2012 is largely attributed to the
advantageous timing of products purchased from Japan. PRM had
purchased a significant amount of dried seafood in 2010, prior to the tsunami
in March 2011, after which retail prices went up significantly, benefiting the
Company.
Gross Profit Margin
The overall gross profit margin decreased from 46% in the fiscal year 2010,
to 39% in the fiscal year 2011, reflecting an increase in the cost of sales,
most notably those related to inventory. Gross profit margins rose again to
47% in 2012. Management anticipates the gross profit margin will remain at
this level reflecting the Company’s ability to benefit from economies of scales
and cumulative purchasing power as its business grows.
Other Income
Other income comprises principally interest income, insurance compensation,
and supplier rebates income. Other income amounted to TEUR 0 and TEUR
0.2 for fiscal years 2010 and 2011, respectively, increasing to TEUR 18, or
0.18% of revenue during fiscal 2012.
Selling and Distribution Expenses and Administrative Expenses
Selling and distribution expenses and administrative expenses mainly
comprise advertising, building management fees, depreciation, utilities,
insurance, rents and salaries.
Selling and distribution expenses and administrative expenses increased
from TEUR 1,072 in fiscal 2010, by TEUR 656 (61%) to TEUR 1,728 in the
financial year 2011 and by TEUR 760 (44 %) to TEUR 2,488 in financial year
2012. These increases are primarily attributed to an increase in marketing
and advertising expenses associated with the growth of the Giant Luxury
network. The growth in selling and distribution expenses slowed during fiscal
year 2012, reflecting a stabilizing of the marketing campaigns.
Income Tax Expense
Income tax expense increased from TEUR 16 in fiscal 2010 to TEUR 115 in
fiscal 2011 and TEUR 221 in fiscal 2012. PRM paid a cumulative rate of 21%
and 22%, respectively, for fiscal 2010 and 2011; however this rate decreased
to 16% for fiscal 2012. This decline reflects a change in the Company’s
corporate structure, which resulted in PRM paying an unnecessarily high rate
in the prior years. Going forward, PRM’s tax rate should stabilize in the 14%
to 17% range, which is typical for Hong Kong.
16
Balance Sheet Data
30.09.2012
EUR
30.09.2011
EUR
30.09.2010
EUR
ASSETS
Non-current assets
Plant and equipment
Loan to a director
319,994
561,047
188,060
-
104,880
-
Total non-current assets
881,041
188,060
104,880
Current assets
Inventories
Trade and other receivables
Amount due from ultimate holding company
Loan to a director
Cash and cash equivalents
3,730,604
3,202,463
292,750
22,354
491,654
2,269,070
724,688
220,990
1,098,251
234,351
184,123
Total current assets
7,739,825
3,214,748
1,516,725
TOTAL ASSETS
8,620,866
3,402,808
1,621,605
EQUITY AND LIABILITIES
Equity
Share capital
Reserves
502,890
1,635,720
1
507,198
1
97,544
TOTAL EQUITY
2,138,610
507,199
97,545
LIABILITIES
Non-current liabilities
Bank borrowings
Obligation under finance lease
1,149,859
38,957
8,003
6,943
12,216
Total non-current liabilities
1,188,816
8,003
19,159
Current liabilities
Bank overdrafts
Trade and other payables
Amounts due to related parties
Income tax payable
Bank borrowings
Obligation under finance lease
3,318
2,337,159
1,622,893
358,331
958,665
13,074
10,837
1,965,506
763,310
136,874
6,915
4,164
9,500
881,800
581,382
19,286
9,232
3,701
Total current liabilities
5,293,440
2,887,606
1,504,901
Total liabilities
6,482,256
2,895,609
1,524,060
Total liabilities and equity
8,620,866
3,402,808
1,621,605
Non-Current Assets
Property, Plant and Equipment
The Company leases the property for each of its locations, thus property
plant and equipment comprise mainly leasehold improvements, furniture and
fixtures, office equipment and motor vehicles. Property, plant and equipment
increased from TEUR 105 as at 30 September 2010, to TEUR 188 as at
September 30 2011, and TEUR 320 at September 2012. The increase
resulted primarily from the launch of new retail locations and the
establishment of a warehouse in fiscal 2012.
Current Assets
Current assets mainly comprise inventories, prepayments, trade and other
receivables and cash and bank balances.
Inventories
17
Inventories increased from TEUR 1,098 as at 30 September 2010, by TEUR
1171, or 107% as at 30 September 2010 to TEUR 2,269, and another TEUR
1,461 or 64% to TEUR 3,731 as at 30 September 2012. These increases
largely reflect the Company’s growing product needs as it supplies a larger
retail network and warehouse.
Trade and Other Receivables
Trade and other receivables increased from TEUR 234 as at 30 September
2010 to TEUR 490 (209%) in fiscal 2011, to TEUR 724 as at 30 September
2011, and again to TEUR 3,202, an increase of TEUR 2,478 or 342% at
September 30, 2012, reflecting overall higher sales during this period. The
growth in receivables is in accord with the increase in revenue, and in
particular a growing proportion of sales to wholesale customers.
Cash and Cash Equivalents
Cash and bank balances comprise cash at bank and cash on hand. Cash
and cash equivalents amounted to TEUR 184 and TEUR 220, as at 30
September 2010, 2011, respectively and TEUR 491 in 2012. Cash is
managed in order to insure appropriate balances while optimizing the
Company’s ability to develop inventory at advantageous rates.
Equity
Equity comprises share capital, exchange difference, and retained earnings.
Equity increased consistently over the audited period from TEUR 97 as at 30
September 2010; increasing TEUR 410 (422%) to TEUR 507 as at 30
September 2011, by TEUR 1,631 (322%) to TEUR 2,139 as at 30 September
2012. These increases are caused by stronger profits, combined with the
fact that no dividends have been distributed.
Current Liabilities
Current liabilities comprise trade and other payables, amount due to related
parties, bank borrowings and current income tax payable.
Trade and Other Payables
Trade and other payables comprise mainly trade payables, salary payables
and other payables. Trade payables increased from TEUR 881 as at 30
September 2010 by TEUR 1,084 (123%) to TEUR 1,965 at 30 September
2011. At September 30, 2012, trade payables had increased by TEUR 371
(116%) to TEUR 2,337. These increases primarily reflect the growth in
inventory and staff in servicing the Stores and warehouse.
Amount Due to Related Parties
Amounts due to related parties comprise compensation of key management,
sale of goods, and amounts due to a director. Amounts due to related parties
increased from TEUR 581 in 2010, to TEUR 763 at September 30, 2011, and
again to TEUR 1,623 at September 20, 2012. This increase primarily reflects
advances from Mr. Chung Wing Chin, a director of the Company. These
advances are interest-free, unsecured and has no fixed term of repayment.
Liquidity
The following table presents cash flow data of PRM for the years ended 30
September 2010, 2011 and 2012. The analysis of the statement of cash flows
is as follows:
18
2012
EUR
Cash flows from operating activities
Profit before tax
Adjustments for:
Finance cost paid
Interest income recognised in profit or loss
Gain on disposal of plant and equipment
Depreciation of plant and equipment
2011
EUR
2010
EUR
1,276,650
514,987
79,007
47,233
(8,844)
(5,426)
76,144
3,511
(10)
55,765
1,618
(9)
35,401
1,385,757
574,253
116,017
Changes in operating assets and liabilities:
Increase in inventories
(Increase)/decrease in trade and other receivables
Increase in trade and other payables
(1,302,587)
(2,402,934)
244,678
(1,146,869)
(340,943)
1,061,014
(671,234)
38,979
627,331
Cash (used in)/generated from operation
(2,075,086)
147,455
111,093
Hong Kong Profits Tax paid
Net cash (used in)/generated from operating
activities
(11,129)
-
-
(2,086,215)
147,455
111,093
Cash flows from investing activities
Interest received
Purchase of plant and equipment
8,844
(143,542)
10
(137,348)
9
(77,730)
Net cash used in investing activities
(134,698)
(137,338)
(77,721)
Cash flows from financing activities
Interest paid
Repayment to bank borrowings
Proceed from bank borrowings
Loan to a director
Advances from ultimate holding company, net
Advances from related parties
Repayment of finance lease
(47,233)
(83,622)
2,159,639
(576,416)
235,769
801,707
(7,180)
(3,511)
(8,974)
41,314
(3,597)
(1,618)
16,184
12,232
(1,127)
Net cash generated from financing activities
2,482,664
25,232
25,671
Net increase in cash and cash equivalents
261,751
35,349
59,043
Cash and cash equivalents at beginning of the year
210,153
174,623
108,037
Effect of foreign exchange rate changes
Cash and cash equivalents at end of the year
Cash and bank balances
Bank overdrafts
16,432
181
7,543
488,336
210,153
174,623
491,654
(3,318)
220,990
(10,837)
184,123
(9,500)
488,336
210,153
174,623
Net Cash Flow Generated from Operating Activities
Net cash flow generated from operating activities increased from TEUR 111
in fiscal year 2010, to TEUR 147 (32%) for fiscal year 2011. These increases
are mainly attributable to an increased profit before tax, partially offset by an
increase in cash resources used to finance working capital.
The Company had a negative cash flow from operations of TEUR 2,086 in
fiscal 2012, which can be attributed to increases in inventory, receivables and
prepayments, primarily as related to the opening of new stores and the
warehouse.
Net Cash Flow Generated from Investing Activities
Cash flow from investing activities primarily comprises the purchase of plant
and equipment, which increased from TEUR 77 in 2010 to TEUR 137 in fiscal
year 2011 and decreased slightly to TEUR 135 in fiscal 2012, reflecting the
purchase of plant and equipment.
19
Net Cash Flow Used in Financing Activities
Cash flow from financing activities comprises mainly the advances from
related parties, lease financing and bank borrowing. Net cash used in
financing activities was TEUR 26 for fiscal 2010, and TEUR 25 in fiscal 2011,
increasing to TEUR 2,483 in fiscal 2012. This increase largely reflects the
repayment of a loan to one director and an increase in bank borrowing.
Cash and Bank Balance at End of Financial Year
In keeping with the changes discussed above, cash and bank balance at end
of financial year amounted to TEUR 175 and TEUR 210 as at 30 September
2010 and 2011, increasing to TEUR 488 at fiscal yearend 2012.
B.8
Selected
key pro
forma
financial
information
Not applicable. No pro forma financial information has been prepared by the
Company.
B.9
Profit
forecast or
estimate
Not applicable. No profit forecast or estimate is being presented by the
Company.
B.10 Qualifications in
the audit
report on
the
historical
information
Not applicable. The audit reports on the historical financial information
included in this Prospectus have been issued without qualifications.
B.11 Explanation
if the
Issuer’s
working
capital is
not
sufficient
for its
present
requirements
Not applicable. PRM Group’s working capital is sufficient for its present
requirements.
B.12 Explanation
if the
Issuer’s
working
capital is
not
sufficient
for its
present
requirements
Not applicable. PRM Group’s working capital is sufficient for its present
requirements.
20
C.
Securities
A description of
the type
and the
class of the
securities
being
offered
and/or
admitted to
trading,
including
any security
identification
number
All shares of the Company have been and will be issued as no par value
ordinary bearer shares as prescribed by the Company’s articles of
association. The current share capital of the Company in the amount of EUR
6,403,007.00 is represented by one global share certificate without dividend
coupons, which is deposited with Clearstream Banking AG,
Mergenthalerallee 61,
65760 Eschborn, Germany.
C.2
Currency of
the
securities
issue
EURO
C.3
The number
of shares
issued and
fully paid
and issued
but not fully
paid
The share capital of the Company initially amounted to EUR 50,000.00. On
06 December 2012 the shareholders’ meeting has resolved to increase the
share capital of the Company by EUR 6,353,007.00 to EUR 6,403,007.00 by
issuance of 6,353,007 registered shares without par value and each of such
shares having a portion of the Company’s share capital in the amount of EUR
1.00. Such capital increase has been carried out against contribution in kind
(Sacheinlage) of all shares of the share capital of Giant Luxury Holdings Ltd.,
a limited liability company incorporated under the laws of Hong Kong and
which is registered in the Companies Registry of Hong Kong under company
no. 1631959. It is currently divided into 6,403,007 ordinary registered shares
with no par value (Stückaktien). The share capital of the Company is fully
paid up.
The par
value per
share, or
that the
share have
no par
value
The shares have no par value.
C.4
Description
of the rights
attached to
the
securities
Each of the shares of the Company entitles the shareholder to one vote at
the general shareholders’ meeting of the Company. The new shares are
entitled to dividends as of the beginning of the financial year of their issuance
and for any following financial years, i.e. beginning 1 January 2013.
C.5
A
description
of any
restrictions
on the free
transferabili
ty of the
securities
Not applicable, as there are no restrictions on the transferability of the shares
in the Company.
C.1
To the extent the global share certificate has been issued in respect of the
shares of the Company, the shareholders have no claim to the issue of
individual share certificates.
German Securities Identification Number (WKN): A1PHEF
International Securities Identification Number (ISIN): DE000A1PHEF0
Ticker Symbol: 7PR
21
C.6
C.7
D.
D.1
An
indication
as to
whether the
securities
offered are
or will be
the object
of an
application
for
admission
to trading
on a
regulated
market and
the identity
of all the
regulated
markets
where the
securities
are or are to
be traded
The Company expects to apply on __________ for admission of its shares to
trading on the regulated market segment (regulierter Markt) of the Frankfurt
Stock Exchange (General Standard). This application for admission to trading
will include
A
description
of dividend
policy
Until the Offering is completed and trading in the Company’s shares in the
Regulated Market has commenced, no dividends will be paid to the Existing
Shareholders and retained earnings will remain with the Company. Future
dividends will depend on the Company's earnings and financial position, the
results of operation, the capital needs, the plans for expansion, the profit after
tax financial position, the expected financial performance, the projected
capital expenditures and other investment plans, any restriction on dividend
payments under the Company's financing arrangements as well as other
factors. The Company intends to distribute profits only if and to the extent
covered by the annual net income (Jahresüberschuss) which is shown in the
respective Company's annual financial statement and to the extent that
profits are not needed to fund the Company’s further growth. The remaining
profit, if any, shall be booked into retained earnings and shall be used to
finance the further development of the Company's business and its internal
growth. In order to report net profits available for distribution, PRM AG as a
holding company depends on profit distributions from its subsidiaries..PRM is
a holding company, the liquidity of which depends upon having access to the
liquid funds of its operating subsidiary located in Hong Kong, which might not
be able to remit profits. The costs of this offering will have a one-time impact
that will adversely affect the Company’s results of operations in the financial
year 2012. The Company was founded on 8 February 2012 as a shelfcompany (Vorratsgesellschaft) and incorporated upon registration in the
commercial register (Handelsregister) with the local court (Amtsgericht) of
Munich on 24 April 2012. It became the ultimate holding company of PRM
only on _____.

up to 1,000,000 no par value ordinary bearer shares (Inhaberaktien),
resulting from a capital increase against contribution in cash to be
resolved
by
an
extraordinary
shareholders
meeting
(Hauptversammlung) of the Company each such share with a
nominal value of EUR 1.00 in the share capital and with full dividend
rights as from January 1, 2013, and

6,403,007 no par value ordinary bearer shares (Inhaberaktien)
Admission decision regarding the existing shares of the Company and the
new shares are expected to be announced on 8 March 2013 Trading of the
existing shares of the Company and of the new shares on the Frankfurt Stock
Exchange is expected to commence on 12 March 2013.
Risks
Key
information
on the key
risks that
are specific
to the
issuer or its
industry
Investors should carefully consider all of the information set out in this
Prospectus and, in particular, the risks described below before deciding on
whether to purchase shares of the Company. PRM Group’s business,
financial condition and results of operations could be materially adversely
affected, should any of these risks materialize, alone or in connection with
other risks or circumstances. The market price of the Company’s shares
could decline due to the occurrence of any of these risks, and investors may
lose all or part of their investment as a result thereof. The risks described
below are all substantial risks that the Company is aware of but may not be
22
the only risks to which PRM Group is exposed. Other uncertainties and risks,
which are currently unknown to the Company may also impair the operations
of PRM Group and cause considerable harm to its business and its net
assets, financial position and results of operations. The order in which the
following risk factors are presented does not reflect the likelihood of their
occurrence, nor the extent or significance of each individual risk.
The order in which the risk factors are presented is not an indication of the
likelihood of the risks actually occurring, the significance or degree of the
risks or the scope of any potential impairment to PRM Group’s business. The
risks mentioned could materialize individually or cumulatively.
Risks related to PRM Group’s Business:

PRM Group operates in a highly competitive market and the
increased competition may result in a decline in its market share and
lower profit margins

PRM Group may not be able to maintain its position as a wholesale
supplier within Hong Kong’s dried seafood market

PRM Group is dependent on its suppliers and disruptions in the
supply of dried seafood or increase of the prices could adversely
affect its business operations

PRM Group’s liability to deliver quality products, poor product quality
or product contamination could lead to loss of sales, higher costs,
negative publicity and payment of compensation to customers and/or
product liability claims.

The PRM’s Giant Luxury and Shang Yu Tang brands have a limited
history in the industry.

As PRM relies on its brands, any failure to effectively promote and
maintain its brands may materially and adversely affect its business
and results of operations.

No-payment by customers resulting in operating losses

PRM may not be able to adequately protect its intellectual property
rights and its know-how, and the sale of counterfeit products may
adversely affect its brands and business.

Being dependent on suppliers for all of its products, PRM may not be
able to ensure that the products provided by its suppliers meet its
requirement, nor may it be able to secure products form additional
qualified suppliers in the future.

PRM Group’s brand image and business may be negatively affected
by actions of its suppliers.

PRM Group depends significantly on its board of directors.

PRM Group’s historical financial performance should not be used as
an indicator for its future financial performance.

PRM Group’s margins and profitability may be adversely affected as
a result of increased costs.

PRM Group’s labor costs have risen significantly in recent years and
could continue to rise at a comparable rate or even faster.

PRM’s future success depends on the successful recruitment and
retention of qualified personnel.

PRM may be affected by employee misconduct, where employees
either may commit illegal acts or act negligently against the interests
of the Company

PRM may fail to implement its growth strategy and production
23
expansion plan successfully.
D.3
Key information on
the
key
risks that
are
specific to
securities

PRM may be exposed to product liability, property damage or
personal injury claims, and the insurance coverage of PRM my not
be adequate to cover all potential liability or losses.

The Company’s management board is not experienced in complying
with German legal requirements, and PRM has not yet implemented
a comprehensive corporate compliance system.

The Company’s supervisory board may have difficulties in
adequately supervising the management board since two members
of the supervisory board reside abroad.

PRM Group may be involved in disputes and litigation.

PRM’s performance in the future is dependent on the Hong Kong
economy. Changes in consumer spending patterns could materially
affect the Company’s growth and profitability.

Economic instability in China could adversely affect PRM’s business

The PRC’s tourism policies contain inherent uncertainties.
Risks related to the Offering:

The Offering may not result in an active and liquid market for the
Company’s shares.

The market price for the Company’s shares may be volatile.

The sale, or perceived sale of shares by the Existing Shareholders
could adversely affect the market price of the Company’s shares.

The Offering may not be carried out in full, which may negatively
affect the growth prospects of PRM and/or the liquidity of the shares
in the market.

Investors engaging in short sales may not be able to financially cover
these sales through the delivery of shares.

The Company’s shares have not yet been publicly traded, and there
is no guarantee that a liquid market will develop or continue following
the initial public offering.

The price and trading volume of the Company’s shares could
fluctuate significantly, and investors could lose all or part of their
investments.

Further capital measures could significantly dilute existing PRM
shareholders and cause the share price to decline.

The Offering might not be completed, in which case investors could
lose security commissions paid and be exposed to risks from any
short selling of the shares.

The Company’s ability to pay dividends will depend in part on the
transfer of distribution of profits from its subsidiaries.

PRM Group’s historical earnings and other historical financial data
are not necessarily predictive of earnings or other key financial
figures of PRM and its subsidiaries going forward.

PRM Group will face additional administrative requirements and incur
higher on going costs as a result of the initial public offering.

There may be too little liquidity in PRM’s shares.

Risk of short sales before delivery of shares.

PRM’s management will after the Offering indirectly still hold a
24
significant portion of the share capital or the Company which will
enable it to exercise significant control over PRM and could create
conflicts of interest.

E.
E.1
E.2
Future sales or market expectations of sales of a large number of
certain shareholders could cause the share price to decline.
Offer
The total
net
proceeds
and an
estimate of
the total
expenses of
the
issue/offer,
including
estimated
expenses
charged to
the investor
by the
issuer or
the offeror
The Company will receive the net proceeds from the sale of the Offer Shares
(“Net Proceeds”), which equals to the gross proceeds from the sale of the
Offer Shares (“Gross Proceeds”) less expenses paid by the Company in
connection with the Offering. As the Company will place the Offer Shares
itself, no selling commissions are expected to be paid. The Net Proceeds
depend on the number of shares offered and placed in the Offering and the
share price in the Offering.
Reasons for
the offer,
use of
proceeds,
estimated
net amount
of the
proceeds
The Net Proceeds will be used by the Company mainly for the expansion of
PRM Group’ business in Hong Kong and Macau, including the opening of
new stores. The Company may also dedicate some of the received funds to
further marketing of its brands.
The Company estimates that the costs of the Offering will be approximately
EUR 500,000.00. Assuming placement of all offered shares, the Company
believes that total Net Proceeds of approximately EUR 1,500,000.00 are
attainable.
The following is an overview of the principal intended uses presented by
order of priority of such uses assuming the Net Proceeds from the Offering to
be EUR 1,500,000.00:
(i) Retail store expansion
EUR 600,000.00 (apprx. 40% of the Net Proceeds) will be earmarked for this
purpose. The Company will embark on a 3-year plan to grow its new store
concept comprising new stores as well as retail boutiques in airports and
hotels in Hong Kong. In addition, it will open flagship stores to promote brand
awareness and to fuel growth of the newly opened stores. This will include
without limitation leasehold improvements and cash deposits for new leases.
(ii) Marketing Program Including Promotion of Brands
The Company will use EUR 200,000.00 (13% of the Net Proceeds) for the
implementation of a marketing program and brand promotion activities to
support its sales growth.
(iii) Working capital for expanded operations
The Company will reserve EUR 200,000.00 (13% of the Net Proceeds) for
working capital purposes to finance its proposed expanded operations.
(iv) Inventory
The Company will use EUR 500,000.00 (34% of the Net Proceeds for
additional inventory to supply its new stores.
E.3
A
description
of the terms
The Offering consists of a public offering by the Company itself in Germany
and the United Kingdom and private placements to institutional investors
outside Germany, the United Kingdom and the United States.
25
and
conditions
of the offer
The Offering consists of up to 1,000,000 non par value ordinary bearer
shares (Inhaber-Stückaktien) of Pacific Retail Merchants AG created under
and in accordance with German law, each ordinary bearer share having a
notional amount of the share capital of EUR 1.00 and each vested with full
dividend rights for the entire financial year 2012, consisting of:
 1,000,000 no par value ordinary bearer shares which emanate from a
capital increase against cash contribution pursuant to a resolution
adopted by the extraordinary shareholders’ general meeting
(Hauptversammlung) of the Company;
No fixed tranches have been reserved for any particular group of investors or
for the intended private placement.
The nominal value of the 1,000,000 shares that are the subject of this
Offering represents a total of EUR 1,000,000.00 of the share capital of the
Company.
Upon implementation and registration of the capital increase against cash
contribution pursuant to a resolution adopted by the extraordinary
shareholders’ general meeting (Hauptversammlung) to be held on
_________, the share capital of the Company will amount up to 7,403,007
shares issued and outstanding.
In connection with the Offering, approximately 15.6% of the shares of the
Company will be offered. The actual number of Offer Shares is expected to
be published on ________ in an announcement on the Company’s website
(www.pacificretailmerchants.com) and as a corporate news.
In connection with the Offering, the Company will receive the Net Proceeds
from the sale of the Offer Shares.
The Offering will be made by the Company itself and the offer price is EUR
2.00 per Offer Share. The offer price was set by the Company based upon a
discount, as an incentive to investors, to its own valuation using typical
valuation methods such as discounting cash flow.
The Offering will be denominated in Euro and the offer period, within which
investors will have the possibility to place purchase orders for the shares, is
expected to begin on 11 March 2013 and is expected to end on 01 April
2013. Interested investors are asked to pay attention to the announcements
published in the media mentioned in the preceding paragraph for further
details of the Offering. During the offer period, offers to purchase shares
(“Share Subscriptions”) may be submitted to the Company by facsimile
message to the number: +49 89 809 902 999. On the last day of the offer
period, investors will be able to submit offers to purchase shares until 12:00
a.m. (noon) (Central European Time) if they are private investors; institutional
investors will be able to submit offers until 4pm (Central European Time).
Share Subscriptions are only valid under the following conditions: (i) the
subscription form provided by the Company on its website
(www.pacificretailmerchants.com) is used and completely and accurately
filled in and (ii) the subscription price is paid in full at the latest at the end of
the offer period to the Company account specified on the subscription form
(credit of Company account is relevant).
The Company reserves the right to decrease the number of Offer Shares,
and/or to extend or shorten the entire offer period. Should any of the terms of
the offer be modified, the change will be published via an electronic
information
system
and
on
the
Company’s
website
(www.pacificretailmerchants.com). This publication will be made to the extent
required
under
the
German
Securities
Prospectus
Act
(Wertpapierprospektgesetz) as a supplement (Nachtrag) to the Prospectus.
There will be no individual notification of investors who have submitted
purchase offers. Any changes to the number of Offer Shares or to the price or
to any extension or shortening of the offer period will not nullify any purchase
orders that have already been placed. Investors who have already placed
purchase orders prior to the publication of a supplement will have the right to
26
withdraw these purchase orders within two business days following
publication of the supplement as is provided for in the German Securities
Prospectus Act (Wertpapierprospektgesetz). Instead of withdrawing their
purchase orders, investors may also amend the purchase orders submitted
prior to publication of the supplement (Nachtrag) or alternatively place new
limited or unlimited purchase orders within two business days after
publication of the supplement (Nachtrag).
Purchase orders are revocable until the end of the offer period.
Once the offer period has expired, the shares placed during the Offer will be
allotted to investors based on the orders that they submitted. It is expected
that the number of shares placed during the Offer will be published on
_________ on the Company's website (www.pacificretailmerchants.com) and
as a corporate news.
Investors who have submitted purchase orders with with the Company will be
able to obtain information from the Company regarding the number of shares
which will be allotted to them at the earliest possible date but no earlier than
the banking day which follows the expiration date of the offer period.
Multiple subscriptions are permissible. There is no minimum and/or maximum
amount of subscription. Book-entry delivery of the allotted shares is expected
to occur as of 08 April 2013. The Company reserves the right not to accept
purchase orders in whole or in part, e.g. in case the placement volume
proves insufficient to satisfy all the orders placed.
E.4
A
description
of any
interest that
is material
to the
issuer/offer
including
conflicting
interests
Since the Company will receive the proceeds from the offering and these will
strengthen the equity base of the Company, all shareholders with a direct or
indirect interest in the Company, in particular the shareholders is PRM prior
to the Offering (“Existing Shareholders”), have an interest in the
implementation of the capital increase that forms the subject matter of the
offering.
E.5
Name of
person
entity
offering
sell
security
The shares are being offered for sale exclusively by the Company.
the
or
to
the
Lock-up
agreements
; the parties
involved
and
indication
of
the
period
of
the lock up
The “Existing Shareholders” have agreed with VEM Aktienbank AG that, for a
period of six (6) months (“Lock Up Period”) after the date of commencement
of trading in the Company’s shares, they will not
 offer, pledge, sell, contract to sell, sell an option to buy, buy an option
to sell or otherwise, directly or indirectly, transfer or dispose of shares
of the Company or other securities that are convertible into or
exchangeable for shares of the Company;
 enter into swap transactions or transactions that transfer the economic
risk of holding the shares to a third party, in whole or in part, regardless
of whether any such transaction is to be settled by delivery of shares,
payment in cash or other consideration; as well as
 initiate, vote in favor of or in any other way support a capital increase
of the Company or issuance of securities which are exchangeable into
shares of the Company or an economically equivalent transaction.
These restrictions do not apply to transactions relating to shares of the
Company that are sold as part of the Offering, and to shares purchased in the
27
Regulated Market
E.6
The amount
and
percentage
of
immediate
dilution
resulting
from the
offer.
In case of a
subscription offer to
the existing
equity
holders, the
amount and
percentage
of
immediate
dilution if
they do not
subscribe
to the new
offer
E.7
Estimated
expenses
charged to
the investor
by the
issuer or
the offeror.
The book value of the shareholders’ equity as at 30 September 2012 as
reflected in the Consolidated Financial Statements under IFRS of Giant
Luxury Holdings Ltd., Hong Kong amounted to TEUR 2,139. This is
equivalent to approximately EUR 0.33 per share (calculated on the basis of
6,403,007 shares -after the capital increase by way of contribution in kind- as
of the date of this Prospectus).
Assuming that all 1,000,000 Offer Shares are placed and that the offer price
would amount to EUR 2.00 per Offer Share, which corresponds to the
midpoint of the price range, the Company would obtain net proceeds of
approximately TEUR 1,500. If the Company had obtained this amount as at
30 September 2012, the book value of shareholders’ equity at that time would
have been about TEUR 3,639 or around EUR 0.49 per share (based on the
increased number of 7,403,007 shares after the placement of 1,000,000 Offer
Shares). Consequently, under the above-mentioned assumptions, the
implementation of the Offering would lead to a direct increase in the book
value of shareholders’ equity of EUR 0.16, or 48,5%, per share for the
Existing Shareholders and a direct dilution of between EUR 1.51, or 75.5%
per share for the purchasers of the Offer Shares.
None.
28
ZUSAMMENFASSUNG DES PROSPEKTS
Zusammenfassungen bestehen aus geforderten Angaben, die als „Punkte“ bezeichnet sind. Diese
Punkte sind in den Abschnitten A – E (A.1 – E.7) fortlaufend nummeriert. Diese Zusammenfassung
enthält alle Punkte, die für die vorliegende Art von Wertpapieren und Emittenten in eine
Zusammenfassung aufzunehmen sind. Da einige Punkte nicht behandelt werden müssen, können
in der Nummerierungsreihenfolge Lücken auftreten. Selbst wenn ein Punkt wegen der Art der
Wertpapiere und des Emittenten in die Zusammenfassung aufgenommen werden muss, ist es
möglich, dass in Bezug auf diesen Punkt keine relevanten Informationen gegeben werden können.
In diesem Fall enthält die Zusammenfassung eine kurze Beschreibung des Punktes mit dem
Hinweis „Entfällt“.
A.
A.1
Einleitung und Warnhinweise
Einleitung
und
Warnhinweis
e
Diese Zusammenfassung soll als Einführung zu diesem Prospekt verstanden
werden.
Jede Entscheidung des Anlegers über eine Investition in die Wertpapiere der
Gesellschaft sollte sich auf die Prüfung des gesamten Prospekts stützen.
Für den Fall, dass vor einem Gericht Ansprüche aufgrund der in diesem
Prospekt enthaltenen Informationen geltend gemacht werden, könnte der als
Kläger auftretende Anleger nach den nationalen Rechtsvorschriften des
jeweiligen Mitgliedsstaates des Europäischen Wirtschaftsraumes die Kosten für
die Übersetzung des Prospekts vor Prozessbeginn zu tragen haben.
Pacific Retail Merchants AG eingetragen im Handelsregister des Amtsgerichts
München unter HRB 198381 und der Geschäftsadresse Rosenheimer Str.
145e, 81671 München, Deutschland (die „Gesellschaft“ oder „PRM“,
gemeinsam mit ihren direkten und indirekten Tochtergesellschaften die „PRMGruppe“) und der VEM Aktienbank AG, Prannerstraße 8, 80333 München
(„Bank“ oder „VEM“) als Antragssteller für die Zulassung der Wertpapiere der
Gesellschaft zum Handel übernehmen im Sinne von § 5 Abs. 2b Nr. 4
Wertpapierprospektgesetz die Verantwortung für den Inhalt dieser
Zusammenfassung einschließlich deren in diesem Prospekt enthaltenen
deutschen Übersetzung. Sie können für den Inhalt der Zusammenfassung
einschließlich der Übersetzung haftbar gemacht werden, jedoch nur für den
Fall, dass die Zusammenfassung irreführend, unrichtig oder widersprüchlich ist,
wenn sie zusammen mit anderen Teilen dieses Prospekts gelesen wird oder
sie, wenn sie mit den anderen Teilen des Prospektes gelesen wird, nicht alle
erforderlichen Schlüsselinformationen vermittelt.
Für den Fall, dass die Zusammenfassung irreführend, unrichtig oder
widersprüchlich ist, wenn sie zusammen mit anderen Teilen des Prospektes
gelesen wird oder für den Fall dass die Zusammenfassung nicht alle
wesentlichen Informationen enthält, können PRM und VEM haftbar gemacht
werden. Weder die Gesellschaft noch die Bank sind gesetzlich verpflichtet, den
Prospekt zu aktualisieren.
A.2

Zustimmung des Emittenten
oder der für die Erstellung
des
Prospekts
verantwortlichen Person zur
Verwendung des Prospekts
für
die
spätere
Weiterveräußerung
oder
endgültige Platzierung von

Das
Angebot
wird
ausschließlich
von
dem
Unternehmen durchgeführt,
es
werden
keine
Finanzintermediäre
eingesetzt.
29
Wertpapieren
Finanzintermediäre
B.
Emittent
B.1
Juristische
und
kommerzielle
Bezeichnung
durch

Angabe der Angebotsfrist
innerhalb deren die spätere
Weiterveräußerung
oder
endgültige Platzierung von
Wertpapieren
durch
Finanzintermediäre erfolgen
kann und für die die
Zustimmung
zur
Verwendung des Prospekts
erteilt wird

Alle sonstigen klaren und
objektiven Bedingungen, an
die
die
Zustimmung
gebunden ist und die für die
Verwendung des Prospekts
relevant sind

Deutlich
hervorgehobener
Hinweis für die Anleger,
dass Informationen über die
Bedingungen des Angebots
eines Finanzintermediäres
von diesem zum Zeitpunkt
der Vorlage des Angebots
zur Verfügung zu stellen
sind.

Nicht anwendbar, da kein
Finanzintermediär eingesetzt
werden soll.

Nicht anwendbar, da kein
Finanzintermediär eingesetzt
werden soll.

Für den Fall dass ein
Finanzintermediär
ein
Angebot macht, wird dieser
die Anleger zum Zeitpunkt
der Angebotsvorlage über
die
Angebotsbedingungen
unterrichten.
Die juristische Bezeichnung der Gesellschaft zum Datum dieses Prospektes ist
Pacific Retail Merchants AG.
Die Gesellschaft ist ausschließlich als Finanz- und ManagementHoldinggesellschaft für die PRM-Gruppe tätig. Die operativen Gesellschaften der
PRM-Gruppe werden von einer Zwischenholding, der Giant Luxury Holdings
Limited („Giant Luxury“), gehalten, welche eine 100%-Tochtergesellschaft der
Gesellschaft ist. Die operativen Tochtergesellschaften haben andere
geschäftliche Bezeichnungen, wie ‘Hing Lung Medicine”, “Universal Medicine”,
“Dah Sing Bird Nest”, “Yue York Medicine”, “Giant King Medicine”, “Giant Royal
Medicine”, “Giant Top Medicine”, “Giant Ocean Medicine”, “Giant Emperor
Medicine”, “Giant Channel Medicine”, “Giant Dragon” und “GL IIXII”.
Zum Datum dieses Prospektes vertreibt PRM sämtliche getrockneten
Meeresfrüchte, Kräuterarzneien und Heilmittel in Geschäften, die unter der
Marke „Shang Yu Tang“ betrieben werden.
B.2
B.3
Sitz,
Rechtsform,
geltendes
Recht, Land
der
Gründung
Die Gesellschaft hat ihren Sitz in Rosenheimer Str. 145e, 81671 München,
Deutschland.
Art der
derzeitigen
Geschäfts-
Die PRM-Gruppe besteht aus den folgenden Gesellschaften: Pacific Retail
Merchants AG, die Holdinggesellschaft mit Sitz in München, Deutschland; einer
Zwischenholding mit Sitz in Hong Kong die unter Giant Luxury Holdings Ltd.
Die Gesellschaft ist im Handelsregister des Amtsgerichts München unter HRB
198381 eingetragen.
Die Gesellschaft ist eine Aktiengesellschaft gegründet in Deutschland nach
deutschem Recht.
30
tätigkeit und
Haupttätigkeiten des
Emittenten
samt der
hierfür
wesentlichen
Faktoren,
Hauptprodukt
und/oder –
dienstleistungskategorien,
Hauptmärkte,
auf denen
der Emittent
vertreten ist.
firmiert und den operativen Gesellschaften Hing Lung Medicine Company
Limited, Universal Medicine Company Limited, Dah Sing Bird Nest Store
Limited, Yue York Medicine Limited, Giant King Medicine Limited, Giant Royal
Medicine Limited, Giant Top Medicine Limited, Giant Ocean Medicine Limited,
Giant Channel Medicine Limited, Giant Emperor Medicine Limited, Giant
Dragon (China) Limited und GL IIXII Limited (gemeinsam „Operative
Tochtergesellschaften“); die Operativen Tochtergesellschaften haben ihren Sitz
allesamt in Hong Kong und sind nach dem Recht von Hong Kong gegründet.
Geschäftsüberblick
Die PRM-Gruppe vertreibt verschiedene getrocknete Meeresfrüchte und
andere chinesische Delikatessen, Arzneimittel und Heilmittelzusätze mittels
eines Netzwerks von Ladengeschäften unter der Marke „Shang Yu Tang“, die
im Eigentum der Gesellschaft stehen. Die Gesellschaft vertreibt zusätzlich eine
Reihe von Pflegeprodukten, freiverkäufliche Arzneimittel und Heilmittelzusätze
für Einzelhandel und Großkunden.
Hong Kong bietet für die PRM-Gruppe ein ideales Umfeld hinsichtlich des
Marktes für getrocknete Delikatessen. Hong Kongs geographische Lage als
„Tor zum Osten“ geschafft der Gesellschaft Zugang zu Lieferanten von
getrockneten Meeresfrüchten in der ganzen Welt.
Schlüsselprodukte und wesentliche Dienstleistungen
In der chinesischen Kultur wird getrockneten Delikatessen wie Ohrschnecken,
Fischmägen, Vogelnestern, Seegurken und Vitalpilzen eine große Bedeutung
zugeschrieben.
Die nachfolgende Darstellung gibt einen Überblick über die populärsten
getrockneten Delikatessen der Gesellschaft.

Getrocknete Ohrschnecken - werden regelmäßig für traditionelle
chinesische Gerichte genutzt.

Seegurke - ein geleeartiges Meerestier von welchem angenommen
wird, dass es wertvolle Mineralien enthält.

Ginseng Wurzel - seit hunderten Jahren ein Hauptbestandteil
chinesischer Kräutermedizin

Haifischflossen - werden in der chinesischen Kultur als Luxusgüter
angesehen und gelten als Symbol für Wohlstand, Macht und Einfluss

Fischmagen ein inneres Organ des Fisches, das gängiger
Bestandteil der chinesischen Küche ist und wird vornehmlich für
Suppen verwendet wird.

Essbare Vogelnester - werden aus Nestern von Schwalben und
anderer, insektenfressender Vögel hergestellt, die ihre Nester mit
klebrigem Speicheldrüsensekret bauen.

Cordyceps - ein in der chinesischen Medizin seit langem genutzter
31
medizinischer Pilz.
Hauptmärkte
Die Gesellschaft ist ausschließlich in der chinesischen Sonderverwaltungszone
Hong Kong tätig. Dabei profitiert sie insbesondere von der hohen Anzahl
chinesischer Touristen, die Hong Kong jährlich besuchen und die exklusiven,
traditionellen Zutaten der chinesischen Küche oder Medizin erwerben.
B.4
B.5
a.
Wichtigste
jüngste
Trends, die
sich auf den
Emittenten
und die
Branchen, in
denen er
tätig ist,
auswirken
Als Sonderverwaltungszone Chinas ist das Wachstum der Wirtschaft und die
Kaufkraft der Einwohner in Hong Kong unmittelbar mit derjenigen Chinas
verknüpft. Die gestiegenen Einkommen sowohl in Hong Kong als auch der
Volksrepublik China haben zu zunehmendem Wohlstand und Nachfrage von
Luxusgütern geführt. PRM geht davon aus, dass die Nachfrage auch im
Segment
der
getrockneten
Meeresfrüchte,
Kräuter-Medizin
und
Gesundheitsartikeln anhält bzw. weiter zunimmt.
Beschreibung der
Gruppe und
der Stellung
des
Emittenten
innerhalb
dieser
Gruppe
Die PRM-Gruppe besteht aus den folgenden Gesellschaften: Pacific Retail
Merchants AG, die Holdinggesellschaft mit Sitz in München, Deutschland; einer
Zwischenholding mit Sitz in Hong Kong die unter Giant Luxury Holdings Ltd.
firmiert und den Operativen Tochtergesellschaften Hing Lung Medicine Company
Limited, Universal Medicine Company Limited, Dah Sing Bird Nest Store Limited,
Yue York Medicine Limited, Giant King Medicine Limited, Giant Royal Medicine
Limited, Giant Top Medicine Limited, Giant Ocean Medicine Limited, Giant
Channel Medicine Limited, Giant Empreror Medicine Limited, Giant Dragon
(China) Limited und GL IIXII Limited; die Operativen Tochtergesellschaften
haben ihren Sitz allesamt in Hong Kong und sind nach dem Recht von Hong
Kong gegründet.
B.6 Name jeder
Person, die
eine direkte
oder indirekte
Beteiligung am
Eigenkapital
des Emittenten
oder einen Teil
der
Stimmrechte
hält, die/der
nach den für
den Emittenten
geltenden
nationalen
Rechtsvorschriften
meldepflichtig
ist, samt der
Höhe der
Beteiligungen
der einzelnen
Personen
In den vergangenen Monaten konnte eine höhere Kunden- und Verkaufsanzahl
in den Läden der PRM-Gruppe festgestellt werden. Dies dürfte nach Ansicht
der Gesellschaft auf ein im September 2012 von der chinesischen Regierung
beschlossenes Wirtschafts-Stimulationsprogramm zurückzuführen sein.
Vor dem öffentlichen Angebot hat der Vorstandsvorsitzende Herr Chung Wing
Chin als größter Aktionär der Gesellschaft ca. 20,91 % aller Aktien. Kein
Aktionär verfügt über eine Sperrminorität.
Die Aktionäre der PRM unmittelbar vor der Durchführung des Angebots (die
„Aktionäre“) sind in der nachfolgenden Tabelle dargestellt:
Altaktionäre
Zahl der Aktien
Anteil am
Grundkapital
(in %)
Chung Wing Chin
1.290.559
20,15
Sunever Group Ltd.
593.505
9,27
Wong Man Keung
589.086
9,20
Lui Kam Fei
330.848
5,17
32
Lai Zhi Yan
314.432
4,91
Yuen Ho Pan
310.643
4,89
Alright International Holdings, Ltd.
308.749
4,82
Wong Siu Lai
303.067
4,73
Wong Yim Ling
303.067
4,73
Aggressive Resources Ltd.
212.147
3,31
Wong Hon Leong
212.147
3,31
Freefloat3
3.653.009
56,21
Total4
6.403.007
100
1)
2)
3)
4)
Herr Chung Wing Chin, ein Staatsbürger von Hong Kong, ist auch Mitglied des Vorstands der
Gesellschaft. Zum Zeitpunkt der Billigung dieses Prospektes ist er der größte Einzelaktionär
der Gesellschaft.
Sunever Group Ltd. ist eine Gesellschaft nach dem Recht von Hong Kong und wird durch ihren
einzigen Gesellschafter, Herrn Wong Wai Keung, kontrolliert. Dieser ist auch ein Mitglied des
Vorstands der Gesellschaft.
Freefloat gemäß der Definition der Frankfurter Wertpapierbörse, demnach alle Aktionäre, die
mehr als 5% Anteilsbesitz an der Gesellschaft halten.
Gesamtsummen addieren sich nicht auf 100%
Altaktionäre
Zahl der Aktien
Anteil am Grundkapital
(in %)
Summe
Nach Durchführung des Angebotes wird die PRM weiterhin mindestens ....% des
Grundkapitals der Gesellschaft halten (unter Annahme der vollständigen
Durchführung der Kapitalerhöhung wie unten unter E.3 definiert) und daher nach
wie vor die Kontrolle über die Gesellschaft ausübe.
Die bestehenden Aktionäre der Gesellschaft haben keine abweichenden
Stimmrechte.
33
Nach der Durchführung des Angebotes Hält der Vorstand der Geselschaft, Herr
Chung Wing Chin, unmittelbar mindestens 17.43% des Grundkapitals und der
Stimmrechte der Gesellschaft.
Angabe, ob die
Hauptanteilseigner des
Emittenten
unterschiedliche
Stimmrechte
haben, falls
vorhanden
Angabe ob an
des Emittenten
unmittelbare
oder mittelbare
Beteiligungen
oder Beherrschungsverhä
ltnisse
bestehen, wer
diese
Beteiligungen
hält bzw. diese
Beherrschung
ausübt und
welcher Art die
Beherrschung
ist
B.7
Ausgewählte
Finanz- und
Geschäftsinformatione
n
Die bestehenden Aktionäre der Gesellschaft haben keine abweichenden
Stimmrechte.
Es bestehen keine unmittelbaren oder mittelbaren Beherrschungsverhältnisse an
der Gesellschaft.
Die Gesellschaft wurde am 08. Februar 2012 als Vorratsgesellschaft gegründet
und am 24. April 2012 in das Handelsregister des Amtsgerichts München
eingetragen.
Das operative Geschäft von PRM wird ausschließlich durch Giant Luxury
Holdings Limited, Hong Kong und die zwölf Operativen Tochtergesellschaften
Hing Lung Medicine Company Limited, Universal Medicine Company Limited,
Dah Sing Bird Nest Store Limited, Yue York Medicine Group Limited, Giant King
Medicine Limited, Giant Royal Medicine, Limited, Giant Top Medicine Limited,
Giant Ocean Medicine Limited, Giant Channel Medicine Limited, Giant Emperor
Medicine Limited, Giant Dragon (China) Limited, GL IIXII Limited betrieben. Der
einzige Gesellschafter von Giant Luxury Holdings Limited ist die Gesellschaft, die
als finanzielle Holdinggesellschaft agiert.
Um die Geschäftstätigkeit von PRM, die finanziellen Bedingungen und das
Geschäftsergebnis aus historischer Sicht darzustellen, werden die Finanzdaten
von Giant Luxury verwendet. Die geprüften konsolidierten Jahresabschlüsse von
Giant Luxury zum 30. September 2010, zum 30. September 2011 und zum 30.
September 2012 wurden nach IFRS erstellt. Die Jahresabschlüsse wurden von
Giant Luxury für das Angebot erstellt. Mit dieser Art de Jahresabschlüsse sollen
Investoren in die Lage versetzt werden, die Entwicklung der Geschäftstätigkeit,
der finanziellen Konditionen und des Geschäftsergebnisses von Giant Luxury
und PRM über die letzten 3 Jahre besser vergleichen zu können.
Die oben genannten geprüften Jahresabschlüsse wurden von HKCMCPA
34
Company Ltd., vereidigten Wirtschaftsprüfern, Hongkong geprüft.
Der Zwischenabschluss zum 30. September 2012 der Pacific Retail Merchants
AG wurde von der VEDA WP Wirtschaftsprüfungsgesellschaft, München geprüft.
Die nachfolgenden Finanzinformationen, die in diesem Abschnitt dargestellt
werden, wurden den geprüften Jahresabschlüssen der Giant Luxury Holdings
Limited entnommen, soweit nichts anderes vermerkt ist.
Die nachfolgenden Zahlen wurden kaufmännisch gerundet. Folglich kann die
Summe der einzelnen Zahlen abweichen.
35
Giant Luxury Holdings Limited:
36
Pacific Retail Merchants AG:
Die nachfolgenden Werte zeigen den Zwischenabschluss der Pacific Retail
Merchants AG vom 24. April 2012 - 30.September 2012. Hierzu existieren keine
Vergleichswerte aus den vorangegangen Jahren, da die Gesellschaft erst
gegründet wurde. As a significant subject after the date of the interim financials it
can be noted, that on 6 December 2012 all the shares of Giant Luxury Holdings
Ltd, Hong Kong has been contributed by capital increase by way of contribution
in kind in Pacific Retail Merchants AG, Munich.
(in tausend EUR)
(geprüft)
Ausgewählte Informationen
der Gewinn-und
Verlustrechnung
24.4.2012 - 30.09.2012
Verwaltungskosten
(7)
Verlust der Periode
Latente Steuern
(7)
2
Verlust der Periode nach Steuer
(5)
Ausgewählte Informationen
der Cash Flow Rechnung
Verlust der Periode
(7)
Cash Flow aus operativer
Geschäftstätigkeit
2
Cash Flow aus
Investitionstätigkeit
38
Cash Flow aus
Finanzierungstätigkeit
0
Nettoveränderung der
Zahlungsmittel
35
Endbestand an liquiden Mitteln
48
(in tausend EUR)
(geprüft)
30.09.2012
24.04.2012
Langfristige Vermögenswerte
0
0
Kurzfristige Vermögenswerte
223
13
Aktiva Gesamt
223
13
Kurzfristige Verbindlichkeiten
178
0
Verbindlichkeiten Gesamt
178
0
Eigenkapital und Rücklagen
45
13
Summe Eigenkapital und Schulden
223
13
Ausgewählte Informationen der
Bilanz
Zum 30. September 2012 hat die Gesellschaft keine Angestellten. Da die
Gesellschaft keine Umsätze im Zeitraum vom 24. April 2012 bis 30. September
2012 hat wird auf die Darstellung von weiteren Finanzdaten & Kennzahlen
37
verzichtet.
Wesentliche
Änderungen
der
Finanzlage
und
der
Geschäftstäti
gkeit
des
Emittenten
Umsatz
Der Umsatz erhöhte sich von TEUR 2.834 im Geschäftsjahr 2010 um TEUR
4.022 bzw. 142% auf TEUR 6.856 im Geschäftsjahr 2011. Im Geschäftsjahr
2012 betrugen die Umsätze TEUR 10.889, was einem Anstieg von 59% im
Vergleich zum Geschäftsjahr 2011 entspricht. Der Anstieg des Umsatzes von
den Geschäftsjahren 2010 bis 2011 beruht hauptsächlich darauf, dass neue
Geschäfte zum Netzwerk hinzukamen und die Verkaufszahlen in den bereits
bestehenden Geschäften gesteigert wurden. Die Erhöhung des Umsatzes im
Geschäftsjahr 2012 beruht weitestgehend auf einer Steigerung des
Großhandels.
Umsatzaufgliederung nach Produkttyp
XXXfolgende Übersicht zeigt eine Aufgliederung der gesamten Umsatzerlöse
unterteilt in Einzel- und Großhandelsumsätze für jedes der Geschäftsjahre die
zum 30 September 2010, 30 September 2011 und zum 30 September 2012
enden.
Die
zweite
Aufstellung
zeigt
die
Untergliederung
der
Gesamtumsatzerlöse in die einzelnen Segmente sowie eine Untergliederung
des Rohertrags innerhalb der Segmente.
Aufgliederung der Umsatzerlöse:
01.10.2011
bis
30.09.2012
01.10.20.10
bis
30.09.2011
01.10.2009
bis
30.09.2010
Umsatzerlöse aus:
−
Großhandelsgeschäft
4.343.385
1.357.021
471.240
−
Einzelhandelsgeschäft
6.546.074
5.499.147
2.363.037
10.889.459
6,856,168
2.834.277
Kategorie
Umsatzanteil
Rohertrag
je Segment1
Großhandel
39%
Getrocknete Meeresfrüchte
34%
Chinesische pflanzliche Medizin
7%
20%
46%
49%
38
Chinesische Nahrungsergänzungsmittel
13%
50%
Pflegeprodukte für den täglichen Bedarf
7%
14%
1
diese Spalte stellt den innerhalb des jeweiligen Segments erwirtschafteten Rohertrag dar, insofern
hat eine Addition zu unterbleiben
Wareneinsatz
Wareneinsatz enthält Inventar, Frachtkosten und direkte Lohnkosten. Die
nachfolgende Tabelle zeigt eine Zusammenfassung des Wareneinsatzes für
jedes geprüfte Geschäftsjahr nach Kategorie. Die Tabelle setzt den
Wareneinsatz auch ins Verhältnis zum Umsatz für die geprüften Geschäftsjahre.
Der Anstieg der Herstellungskosten in % der Umsatzerlöse von 2011 bis 2012
reflektiert den Aufbau des Warenbestandes. Die niedrigeren Herstellungskosten
im Geschäftsjahr 2012 begründen sich hauptsächlich in einem zeitlich günstigen
Einkauf in Japan. PRM hatte einen erheblichen Anteil getrockneter
Meeresfrüchte im Jahre 2010 gekauft, vor dem Tsunami im März 2011, nach
dem die Verkaufspreise signifikant stiegen und wovon die Gesellschaft letztlich
profitierte.
Gewinnspanne
Die Gewinnspanne fiel von 46% im Geschäftsjahr 2010 auf 39% im
Geschäftsjahr 2011 und war auf den Anstieg der Herstellungskosten
zurückzuführen, die hauptsächlich im Ausbau des Warenbestandes begründet
sind. Die Gewinnspanne stieg wieder auf 47% im Geschäftsjahr 2012 an. Der
Vorstand erwartet, dass die Gewinnspanne auf diesem Niveau gehalten wird
aufgrund von Kostenersparnissen und erhöhter Kaufkraft da das Geschäft der
Gesellschaft wächst.
Sonstige Erträge
Sonstige
Erträge
beinhalten
hauptsächlich
Zinseinkünfte,
Versicherungsentschädigungen oder Lieferantenrabatten. Die sonstigen Erträge
betrugen TEUR 0 und TEUR 0,2 für die Geschäftsjahre 2010 und 2011 und
stiegen im Geschäftsjahr 2012 auf TEUR 18 oder 0,18% des Umsatzes an.
39
Vertriebskosten und Verwaltungskosten
Die Vertriebs- und Verwaltungskosten beinhalten hauptsächlich Kosten für
Werbung,
Gebäudeverwaltung,
Abschreibungen,
Betriebsmittel,
Versicherungen, Mieten und Löhne.
Die Ausgaben für Vertrieb und Verwaltung erhöhten sich von TEUR 1,072 im
Geschäftsjahr 2010 um TEUR 656 (61%) auf TEUR 1.728 im Geschäftsjahr
2011 und um TEUR 760 (44%) auf TEUR 2.488 im Geschäftsjahr 2012. Diese
Steigerungen resultieren hauptsächlich aus einer Steigerung der Ausgaben für
Marketing und Werbung in Verbindung mit dem Wachstum des Giant Luxury
Netzwerkes. Der Anstieg der Vertriebskosten reduzierte sich im Laufe des
Geschäftsjahres 2012, was auf eine Stabilisierung der Marketingaktivitäten
zurückzuführen ist.
Einkommensteuer
Die Ausgaben für Einkommensteuer stiegen von TEUR 16 im Geschäftsjahr
2010 auf TEUR 115 im Geschäftsjahr 2011 und TEUR 221 im Geschäftsjahr
2012. PRM bezahlte eine durchschnittliche Steuerquote von 21% und 22%
jeweils fürs Geschäftsjahr 2010 und 2011. Im Geschäftsjahr 2012 sank die
Steuerquote jedoch auf 16%. Die Ursache der
Senkung liegt in einer
Umstrukturierung der Gruppe, da PRM in den vergangenen Jahren unnötiger
Weise zu hohe Einkommensteuer gezahlt hat. Künftig sollte sich die
Einkommensteuerquote von PRM bei 14% bis 17% einpendeln, was typisch für
Hongkong ist.
40
Bilanzzahlen
Anlagevermögen
Sachanlagen
Die Gesellschaft mietet die Ladengeschäfte, so dass die Ausgaben für
Sachanlagen
und
Immobilien
hauptsächlich
Mietereinbauten,
Einrichtungsgegenstände, Büroausstattung und Fahrzeuge beinhalten. Die
Sachanlagen erhöhten sich von TEUR 105 zum 30. September 2010 auf TEUR
188 zum 30. September 2011 und TEUR 320 zum 30. September 2012. Die
Steigerung resultierte hauptsächlich aus der Eröffnung neuer Ladengeschäfte
und eines Lagerhauses im Geschäftsjahr 2012.
Umlaufvermögen
Umlaufvermögen beinhaltet hauptsächlich Warenbestand, Vorauszahlungen,
Forderungen aus Lieferung und Leistung und Bankguthaben.
41
Warenbestand
Der Warenbestand erhöhte sich von TEUR 1.098 zum 30. September 2010 um
TEUR 1.171 bzw. um 107% auf TEUR 2.269 zum 30. September 2011, um
TEUR 1.461 bzw. 64% auf TEUR 3.731 zum 30. September 2012. Dieser
Anstieg reflektiert das gestiegene Warenbedürfnis der Gesellschaft, da ein
größeres Netzwerk an Geschäften und ein Warenhaus bestückt werden.
Forderungen aus Lieferung und Leistung
Die Forderungen aus Lieferung und Leistung stiegen von TEUR 234 zum 30.
September 2010 um TEUR 490 (209%) auf TEUR 724 zum 30. September 2011
und erneut auf TEUR 3.202, was einen Anstieg um TEUR 2.478 oder 342%
zum 30. September 2012 bedeutet, vornehmlich aufgrund gestiegener
Verkaufszahlen während dieses Zeitraums. Der Anstieg der Forderungen geht
einher mit dem Umsatzanstieg und liegt speziell an der gestiegenen Anzahl an
Großhandelskunden.
Bargeld und Zahlungsmitteläquivalente
Bargeld und Bankguthaben beinhalten Bank- und Kassenguthaben. Bargeld und
Zahlungsmitteläquivalente betrugen TEUR 184 zum 30. September 2010, und
TEUR 220 zum 30. September 2011 und TEUR 491 zum 30. September 2012.
Das Bargeld wird dargestellt um angemessene Guthaben sicherzustellen und
gleichzeitig die Möglichkeiten der Gesellschaft zu optimieren Warenbestände zu
günstigen Konditionen aufzubauen.
Eigenkapital
Eigenkapital beinhaltet Aktienkapital, Währungsdifferenzen und nicht
ausgeschüttete Gewinne. Das Eigenkapital hat sich stetig im geprüften Zeitraum
erhöht von TEUR 97 zum 30. September 2010 um TEUR 410 (422%) auf TEUR
507 zum 30. September 2011 und TEUR 1.631 (322%) auf TEUR 2.139 zum
30. September 2012. Dieser Anstieg erklärt sich durch starke Gewinne und
fehlende Dividendenausschüttungen.
Kurzfristige Verbindlichkeiten
Kurzfristige Verbindlichkeiten beinhalten Verbindlichkeiten aus Lieferung und
Leistung, fällige Forderungen von verbundenen Parteien, Bankdarlehen und
fällige Einkommensteuer
Verbindlichkeiten aus Lieferung und Leistung und andere Verbindlichkeiten
Verbindlichkeiten aus Lieferung und Leistung und andere Verbindlichkeiten
beinhalten hauptsächlich Verbindlichkeiten aus Lieferungen, Löhnen und
anderen Verbindlichkeiten. Die Verbindlichkeiten aus Lieferung und Leistung
stiegen von TEUR 881 zum 30. September 2010 um TEUR 1.084 (123%) auf
TEUR 1.965 zum 30. September 2011. Zum 30. September 2012 stiegen die
Verbindlichkeiten aus Lieferung und Leistung um TEUR 371 (115) auf TEUR
2.337. Der Anstieg beruht hauptsächlich auf einer Aufstockung des
Warenbestandes und Personals in den Ladengeschäften und im Lagerhaus.
Verbindlichkeiten gegenüber verbunden Parteien
Verbindlichkeiten gegenüber verbundenen Parteien beinhaltet die Vergütung
des Managements, Warenverkäufe und fällige Zahlungen an Vorstände. Die
Verbindlichkeiten gegenüber verbundenen Parteien stiegen von TEUR 581 im
42
Geschäftsjahr 2010 auf TEUR 763 zum 30. September 2011 und auf TEUR
1.623 zum 30. September 2012. Dieser Anstieg beinhaltet hauptsächlich
Darlehen von dem Vorstandsvorsitzenden Herrn Chung Wing Chin, einem
Vorstand der Gesellschaft. Diese Darlehen sind zinsfrei, unbesichert und haben
keine festvereinbarte Laufzeit.
Liquidität
Die nachfolgende Tabelle zeigt den Cash Flow von PRM für das Ende der
Geschäftsjahre zum 30. September 2010, 2011 und 2012. Nachfolgend wird der
Cash Flow dargestellt:
Netto-Cash Flow aus operativer Geschäftstätigkeit
Der Netto-Cash Flow aus operativer Geschäftstätigkeit stieg von TEUR 111 im
Geschäftsjahr 2010 auf TEUR 147 (32%) für das Geschäftsjahr 2011. Dieser
Anstieg gründet hauptsächlich auf einem gestiegenen Gewinn vor Steuern,
43
sowie auf einem Anstieg der Barreserven die dazu benutzt wurden, das Working
Capital zu finanzieren.
Die Gesellschaft hatte einen negativen Cash-Flow aus der operativen
Geschäftstätigkeit in Höhe von TEUR 2.086 im Geschäftsjahr 2012, der auf die
Erhöhung des Warenbestandes, Verbindlichkeiten und Vorauszahlungen,
hauptsächlich hinsichtlich der Eröffnung von neuen Geschäften und des
Lagerhauses.
Netto-Cash Flow aus Investitionen
Der Netto-Cash Flow aus Investitionen beinhaltet hauptsächlich den Erwerb von
Vorräten und Ausrüstung und stieg von TEUR 77 im Geschäftsjahr 2010 auf
TEUR 137 im Geschäftsjahr 2011. Er ging im Geschäftsjahr 2012 leicht auf
TEUR 135 zurück, was den Erwerb von Vorräten und Ausrüstung widerspiegelt.
Netto-Cash Flow für Finanzierungsaktivitäten
Netto-Cash Flow aus Finanzierungsaktivitäten beinhaltet hauptsächlich
Darlehen von verbundenen Parteien, Leasing-Finanzierung und Bankdarlehen.
Der Netto-Cash Flow der für Finanzierungsaktivitäten benutzt wurde sank von
TEUR 26 im Geschäftsjahr 2010 auf TEUR 25 im Geschäftsjahr 2011 und stieg
im Geschäftsjahr 2012 auf TEUR 2.483. Dieser Anstieg resultiert hauptsächlich
aus der Rückzahlung des Gesellschafterdarlehens und einem Anstieg der
Bankdarlehen.
Barvermögen und Bankguthaben zum Ende jedes Geschäftsjahres
Unter Berücksichtigung der obigen Änderungen betrug das Barvermögen und
Bankguthaben zum Ende des eines Geschäftsjahres TEUR 175 und TEUR 210
zum 30. September 2010 und 2011. Zum 30. September 2012 stieg das
Barvermögen und Bankguthaben auf TEUR 488.
B.8
Ausgewählte
wesentliche
Pro-formaFinanzinformationen
Entfällt. Die Gesellschaft hat keine Pro-forma-Finanzinformationen erstellt.
B.9
Gewinnprogn
osen oder –
schätzungen
Entfällt. Die Gesellschaft hat keine Gewinnprognose oder –schätzung erstellt.
B.10 Beschränkun
gen im
Bestätigungsvermerk zu
den
historischen
Finanzinform
ationen
Entfällt. Die Bestätigungsvermerke zu den in diesem Prospekt enthaltenen
historischen Finanzinformationen wurden ohne Einschränkung erteilt.
B.11 Erklärung, ob
das
Geschäftskapital des
Emittenten
ausreicht, um
die beste-
Entfällt. Das Geschäftskapital der PRM Group ist für die aktuellen Anforderungen
ausreichend.
44
henden
Anforderung
en zu erfüllen
45
C.
Wertpapiere
C.1
Beschreibung
von Art und
Gattung
der
angebotenen
und/oder
zum
Handel zuzulassenden
Wertpapiere
einschließlich
Wertpapierkennung
Alle Aktien der Gesellschaft sind und werden als nennwertlose Stückaktien wie
in der Satzung der Gesellschaft beschrieben ausgegeben. Das gegenwärtige
Grundkapital der Gesellschaft in Höhe von EUR 6.403.007,00 ist in einer
Globalurkunde ohne Anteilsscheine verbrieft, die bei der Clearstream Banking
AG, Mergenthalerallee 61,
65760 Eschborn, Deutschland, hinterlegt ist.
In dem Umfang in welchem Globalurkunden ausgegeben wurden, ist der
Anspruch der Aktionäre auf Einzelverbriefung ausgeschlossen.
WKN: A1PHEF
ISIN: DE000A1PHEF0
Ticker Symbol: 7PR
C.2
Währung
der
Wertpapieremission
EURO
C.3
Zahl der
ausgegebenen
und voll
eingezahlten
und der
ausgegebenen
und nicht
volleingezahlten
Aktien
Das Grundkapital der Gesellschaft betrug ursprünglich EUR 50.000,00. Am 06.
Dezember 2012 beschloss die Hauptversammlung das Grundkapital der
Gesellschaft um EUR 6.353.007,00 auf EUR 6.403.007,00 durch die Ausgabe
von 6.353.007 neuen Aktien ohne Nennbetrag mit einem Anteil am Grundkapital
von EUR 1,- je Aktie. Die Kapitalerhöhung erfolgte durch Sacheinlage aller
Anteile des Stammkapitals der Giant Luxury Holdings Limited, einer Gesellschaft
mit beschränkter Haftung, gegründet nach dem Recht von Hongkong und
eingetragen im Gesellschaftsregister von Hongkong unter der Nummer 1631959.
Das Grundkapital der Gesellschaft ist derzeit eingeteilt in 6.403.007
nennwertlose Inhaberaktien (Stückaktien). Das Grundkapital ist vollständig
einbezahlt.
Nennwert pro
Aktie bzw.
Angabe, dass
Aktien keinen
Nennwert haben
Die Aktien haben keinen Nennwert.
C.4
Mit den
Wertpapieren
verbundene
Rechte
Jede Aktie der Gesellschaft berechtigt zu einer Stimme in der
Hauptversammlung der Gesellschaft. Die Neuen Aktien sind ab dem Beginn des
Geschäftsjahres in dem sie ausgegeben werden, gewinnberechtigt, d.h. ab dem
01. Januar 2013.
C.5
Beschreibung
aller etwaigen
Beschränkungen für die
freie
Übertragbarkeit
der Wertpapiere
Nicht anwendbar, da es keine Beschränkungen der freien Übertragbarkeit der
Wertpapiere gibt.
C.6
Angabe, ob für
die
angebotenen
Wertpapiere die
Zulassung zum
Handel in einem
geregelten
Markt beantragt
wurde bzw.
werden soll,
Nennung aller
Die Gesellschaft wird voraussichtlich am 11. März 2013 die Zulassung ihrer
Aktien zum Handel im regulierten Markt an der Frankfurter Wertpapierbörse
beantragen. Dieser Antrag auf Zulassung zum Handel wird außerdem umfassen:


bis zu 1.000.000 nennwertlose Inhaberaktien die aus einer von der
Hauptversammlung
der
Gesellschaft
zu
beschließenden
Kapitalerhöhung resultieren, wobei jede Aktie einen rechnerischen Anteil
am Grundkapital von EUR 1,00 hat und mit vollen Dividendenrechten ab
1. Januar 2013 ausgestattet ist, und
6.403.007 Inhaberaktien.
46
C.7
D.
D.1.
geregelten
Märkte in denen
die Wertpapiere
gehandelt
werden oder
werden sollen
Die Veröffentlichung der Zulassungsentscheidungen betreffend der bereits
existierenden Aktien und der neuen Aktien werden für den 08. März 2013
erwartet. Die Handelsaufnahme der Aktien der Gesellschaft und der neuen
Aktien an der Frankfurter Wertpapierbörse wird für den 12. März 2013 erwartet.
Beschreibung
der Dividendenpolitik
Bis das Angebot abgeschlossen ist und der Handel der Aktien der Gesellschaft
am Regulierten Markt begonnen hat, werden keine Dividenden an die
bestehenden Aktionäre ausgeschüttet und bislang nicht ausgeschüttete
Gewinne verbleiben bei der Gesellschaft. Künftige Dividendenausschüttungen
hängen von den Erträgen und der Finanzlage der Gesellschaft ab, dem
Geschäftsergebnis, dem Kapitalbedarf, Expansionsplänen, dem Gewinn nach
Steuern, dem erwarteten Finanzergebnis, den projektierten Ausgaben und
anderen Investitionsplänen, Beschränkungen von Dividendenzahlungen
aufgrund von Finanzierungsvereinbarungen der Gesellschaft sowie anderen
Faktoren. Die Gesellschaft beabsichtigt Dividenden nur insoweit auszuschütten
als diese vom Jahresüberschuss gedeckt sind, der im jeweiligen
Jahresabschluss der Gesellschaft ausgewiesen ist, soweit ein solcher
Jahresüberschuss nicht benötigt wird um das weitere Wachstum der
Gesellschaft zu finanzieren. Der verbleibende Überschuss wird in die
Gewinnrücklagen der Gesellschaft eingebucht und wird für die Finanzierung
der künftigen Entwicklung der Geschäftstätigkeit und das Wachstum der
Gesellschaft verwendet. Um ausschüttungsfähige Gewinne ausweisen zu
können, ist die Gesellschaft auf die Abführung des Ergebnisses ihrer
Tochtergesellschaften abhängig. PRM ist eine Holdinggesellschaft, deren
Liquidität davon abhängt, auf die liquiden Mittel der operativen
Tochtergesellschaften die in Hong Kong ansässig sind, zugreifen zu können,
wobei derartige Erträge möglicherweise nicht abgeführt werden können. Dieses
Angebot hat einen einmaligen nachteiligen Effekt auf das Ergebnis der
Gesellschaft im Geschäftsjahr 2012. Die Gesellschaft wurde am 08. Februar
2012 als Vorratsgesellschaft gegründet und am 24. April 2012 im
Handelsregister des Amtsgerichts München eingetragen. Sie wurde als
Holdinggesellschaft der PRM-Gruppe erst am _______ im Handelsregister der
Gesellschaft eingetragen.
Risiken
Zentrale
Angaben zu den
zentralen
Risiken,
die
dem Emittenten
oder
seiner
Branche eigen
sind
Anleger sollten bei ihrer Entscheidung über eine Anlage in Aktien der
Gesellschaft die nachfolgend beschriebenen Risiken sowie die übrigen in
diesem Prospekt enthaltenen Informationen sorgfältig prüfen. Die
Geschäftstätigkeit der PRM-Gruppe, ihre finanzielle Ausstattung und das
Betriebsergebnis können negativ beeinflusst werden, sollte sich eines der
Risiken allein, oder zusammen mit anderen Risiken oder Umständen,
realisieren. Der Marktpreis der Aktien der Gesellschaft könnte bei Eintritt jedes
einzelnen dieser Risiken fallen; in diesem Fall könnten die Anleger ihre
Anlagen ganz oder teilweise verlieren. Die nachfolgend dargestellten Risiken
beinhalten alle wesentlichen Risiken die der Gesellschaft bekannt sind, aber
stellen nicht sämtliche Risiken dar, denen die PRM-Gruppe ausgesetzt sein
kann. Andere Unsicherheiten oder Risiken die derzeit der Gesellschaft nicht
bekannt sind, können die Geschäfte der PRM-Gruppe ebenfalls beeinträchtigen
und können der Geschäftstätigkeit, den Vermögens- und Ertragslage sowie
dem Ergebnis der Geschäftstätigkeit erheblichen Schaden zufügen.
Die Reihenfolge, in der die Risikofaktoren dargestellt sind, stellt weder eine
Aussage über die Eintrittswahrscheinlichkeit noch über die Bedeutung und
Höhe der Risiken oder das Ausmaß der möglichen Beeinträchtigung des
Geschäfts der PRM-Gruppe dar. Die genannten Risiken könnten einzeln oder
kumulativ eintreten.
47
Geschäftsbezogene Risiken der PRM-Gruppe
















Die PRM-Gruppe ist auf einem wettbewerbsintensiven Markt aktiv, und
verschärfter Wettbewerb könnte zu einer Verkleinerung ihres
Marktanteils und zu niedrigeren Gewinnmargen führen.
Die PRM-Gruppe könnte nicht in der Lage sein, ihre Position als
Großhändler auf dem Hongkonger Markt für getrocknete Meeresfrüchte
aufrecht zu erhalten.
Die PRM-Gruppe ist abhängig von ihren Lieferanten und
Unterbrechungen in der Lieferung von getrockneten Meeresfrüchten
oder ein Preisanstieg könnte einen negativen Effekt auf die
Geschäftstätigkeiten der PRM-Gruppe haben.
Die Verpflichtung der PRM-Gruppe qualitative hochwertige Produkte zu
liefern, schlechte Qualität oder verdorbene Produkte können zu einem
Rückgang der Verkaufszahlen, höheren Kosten, negativer Publicity und
Schadensersatzverpflichtungen
gegenüber
Kunden
und/oder
Produkthaftungsansprüchen führen.
Die PRM-Marken Giant Luxury und Shang Yu Tang haben nur eine
begrenzte Geschichte in der Branche.
Da PRM auf seine Marken angewiesen ist, könnte jedes Fehlschlagen
einer effektiven Bewerbung und effektiven Aufrechterhaltung der
Marken die Geschäftstätigkeit und das Geschäftsergebnis negativ
beeinflussen.
Zahlungsausfälle durch Kunden können zu betrieblichen Verlusten
führen.
PRM könnte nicht in der Lage sein, sein Geistiges Eigentum und Know
How angemessen zu schützen und der Verkauf von gefälschten
Produkten könnte PRMs Marken und Geschäftstätigkeit negativ
beeinflussen.
Da PRM für alle Produkte von seinen Lieferanten abhängig ist, könnte
PRM nicht in der Lage sein sicherzustellen, dass die Produkte, die
PRM
von
Lieferanten
erhält,
nicht
die
notwendigen
Qualitätsanforderungen erfüllt oder nicht in der Lage ist die Lieferung
von Produkten von zusätzlichen qualifizierten Lieferanten künftig
sicherzustellen.
Das Markenimage der PRM-Gruppe und die Geschäftstätigkeit könnte
von Handlungen von Lieferanten negativ beeinflusst werden.
Die PRM-Gruppe ist in hohem Maß von seinem Führungspersonal
abhängig.
Die finanzielle Leistungsfähigkeit der PRM-Gruppe in der
Vergangenheit sollte nicht als Indikator für die künftige finanzielle
Leistungsfähigkeit herangezogen werden.
Die Marge und Profitabilität der PRM-Gruppe könnte durch einen
Anstieg der Kosten negative beeinflusst werden.
Die Lohnkosten der PRM-Gruppe sind in den letzten Jahren signifikant
gestiegen und könnten in vergleichbarer Weise oder sogar schneller in
der Zukunft ansteigen.
PRMs künftiger Erfolg hängt von der erfolgreichen Anwerbung und der
Anstellung von qualifiziertem Personal ab.
Fehlverhalten von Arbeitnehmern von PRM durch gesetzeswidriges
Verhalten oder Handeln gegen die Interessen der Gesellschaft könnten
die Finanz- und Geschäftslage der Gesellschaft negativ beeinflussen.
48








D.3 Zentrale
Angaben zu
den
zentralen
Risiken, die
den Wertpapieren
eigen sind
PRM könnte daran scheitern seine Wachstumsstrategie und den
Ausbau seiner Produktpalette fortzusetzen.
PRM
könnte
Produkthaftungsansprüchen
oder
Schadensersatzansprüchen
ausgesetzt
sein
und
der
Versicherungsschutz von PRM könnte nicht ausreichend sein,, diese
potentielle Haftung oder Verluste zu decken.
Der Vorstand der Gesellschaft hat keine Erfahrung mit dem deutschen
Rechtssystem und PRM hat bislang kein adäquates ComplianceSystem eingeführt.
Der Aufsichtsrat der Gesellschaft könnte Schwierigkeiten haben den
Vorstand der Gesellschaft angemessen zu überwachen, da zwei
Mitglieder des Aufsichtsrats im Ausland ansässig sind.
Die PRM-Gruppe könnte Partei von Rechtsstreitigkeiten und
Gerichtsprozessen sein.
Die künftige Entwicklung von PRM ist von der Wirtschaft Hongkongs
abhängig. Änderungen im Konsumentenverhalten könnte das
Wachstum der Gesellschaft und die Profitabilität nachteilig
beeinflussen.
Wirtschaftliche Instabilität in China könnte das Geschäft von PRM
nachteilig beeinflussen.
Die Tourismus-Richtlinien von PRC beinhalten Unsicherheiten.
Risiken in Verbindung mit dem Angebot

Das Angebot könnte nicht zu einem aktiven und liquiden Markt für die
Aktien der Gesellschaft führen

Der Marktpreis der Aktien der Gesellschaft könnte Schwankungen
unterliegen.

Der Verkauf oder der erwartete Verkauf von Aktien durch bestehende
Aktionäre könnte den Marktpreis für die Aktien der Gesellschaft negative
beeinflussen.

Das Angebot könnte nicht vollständig vollzogen werden, was negative
Auswirkungen auf die Wachstumsaussichten der PRM-Gruppe und/oder
die Liquidität der Aktien im Markt führen könnte

Investoren, die Leerverkäufe getätigt haben, könnten nicht in der Lage
sein, diese Verkäufe durch die Lieferung von Aktien zu decken.

Die Aktien der Gesellschaft wurden bislang nicht öffentlich gehandelt
und es gibt keine Garantie, dass sich ein liquider Markt entwickeln oder
nach dem öffentlichen Angebot weiterbestehen wird.

Der Preis und das Handelsvolumen der Aktien könnten wesentlichen
Schwankungen unterliegen und Investoren könnten alles oder einen Teil
ihres Investments verlieren.

Künftige Kapitalmaßnahmen könnten derzeitige Aktionäre von PRM
maßgeblich verwässern und einen Fall des Aktienkurses bewirken.

Die Fähigkeit der Gesellschaft Dividenden zu bezahlen hängt zum Teil
von der Gewinnabführung von Tochtergesellschaften ab.

Die vergangenen Einnahmen der PRM-Gruppe und andere historische
Finanzdaten sind nicht notwendigerweise ein Indikator für künftige
Einnahmen oder andere wesentliche Finanzzahlen von PRM oder den
Tochtergesellschaften in der Zukunft.

Die PRM-Gruppe sieht sich zusätzlichen administrativen Verpflichtungen
ausgesetzt und wird im Zuge des Börsenganges höhere Betriebskosten
49
haben.
E.

Es könnte zu wenig Liquidität in den Aktien der Gesellschaft sein.

Risiko von Leerverkäufen vor der Lieferung der Aktien

Der Vorstand der Gesellschaft wird nach dem Angebot nach wie vor
einen wesentlichen Anteil des Grundkapitals der Gesellschaft halten und
ihn in die Lage versetzen, die Gesellschaft maßgeblich zu kontrollieren
und könnte zu Interessenkollisionen führen.

Künftige Verkäufe oder die Markterwartung künftiger Verkäufe von einer
größeren Anzahl von Aktien könnte dazu führen, dass der Aktienkurs
fällt.
Angebot
E.1
Gesamtnettoerlöse und
geschätzte
Gesamtkosten
der Emission/
des Angebots,
einschließlich
der geschätzten
Kosten, die dem
Anleger vom
Emittenten oder
Anbieter in
Rechnung
gestellt werden.
Die Gesellschaft erhält den aus dem Verkauf der Neuen Aktien stammenden
Nettoerlös („Nettoerlös“); dieser entspricht dem Bruttoerlös („Bruttoerlös“) aus
dem Verkauf der Neuen Aktien abzüglich der Ausgaben die im Zusammenhang
mit dem Angebot bezahlt werden. Da die Gesellschaft die Aktien im Wege einer
Eigenemission selbst platziert wird keine Verkaufsprovision gezahlt. Die
Nettoerlöse hängen von der Anzahl der angebotenen und im Rahmen des
Angebots platzierten Akten sowie dem Angebotspreis ab. Die Gesellschaft
schätzt dass die Kosten des Angebots ca. EUR 500.000,00 betragen werden.
Unter der Annahme, dass alle angebotenen Aktien platziert werden, geht die
Gesellschaft davon aus, dass der gesamte Nettoerlös bis zu EUR 1.500.000,00
betragen wird.
E.2
Gründe für das
Angebot,
Zweckbestimmu
ng der Erlöse,
geschätzte
Nettoerlöse
Die Gesellschaft führt das Angebot hauptsächlich aus das künftige Wachstum
der PRM-Gruppe in Hongkong und Macau zu fördern. Größere finanzielle
Ressourcen erlauben es der PRM-Gruppe das Verkaufs- und Vertriebsnetzwerk
zu vergrößern und zusätzliche Geschäfte zu eröffnen. Die Gesellschaft wird auch
einige der eingeworbenen Mittel für die Bewerbung ihrer Marken verwenden.
Nachfolgend dargestellt ist ein Überblick über die beabsichtigte Verwendung des
Erlöses nach Wichtigkeit unter der Annahme, dass der Nettoerlös aus dem
Angebot bis zu EUR 1,5 Millionen beträgt:
(i) Ausbau des Laden-Netzwerks
EUR 600.000 (40% der Nettoerlöse) werden für die Netzwerkexpansion
verwendet. Die Gesellschaft wird einen 3-Jahres-Plan verabschieden, um ein
neues Konzept für Geschäfte bestehend aus neuen Ladengeschäften und
Boutiquen an Flughäfen und Hotels in Hongkong. Zusätzlich werden Flagship
Stores eröffnet, um das Markenbewusstsein zu fördern und das Wachstum von
neu eröffneten Geschäften zu fördern.
(ii) Markenaufbau und Marketing
Die Gesellschaft wird EUR 200.000 (13% der Nettoerlöse) für
Marketingaktivitäten hinsichtlich der Marke verwenden um den Verkauf zu
fördern.
Hierzu
zählen
insbesondere
die
Einstellung
eines
Unternehmenssprechers, Fernsehwerbung und Sponsoringaktivitäten bei
wichtigen Veranstaltungen, usw.
(iii) Working-Kapital für den Ausbau des Geschäfts
Die Gesellschaft wird EUR 200.000 (13% der Nettoerlöse) als Working-Kapital
zum Ausbau der Geschäftstätigkeit bereithalten.
50
(iv) Warenbestand
Die Gesellschaft wird EUR 500.000 (34% der Nettoerlöse) für den Ausbau des
Warenbestandes und den Erwerb neuer Waren verwenden.
E.3
Beschreibung
der Angebotskonditionen
Das Angebot besteht aus einem erstmaligen öffentlichen Angebot durch die
Gesellschaft selbst in Deutschland und England sowie Privatplatzierungen an
institutionelle Investoren in bestimmten anderen Jurisdiktion außerhalb
Deutschlands, Englands und den Vereinigten Staaten von Amerika.
Das Angebot besteht aus 1.000.000 Inhaber-Stückaktien ohne Nennbetrag der
Pacific Retail Merchants AG nach dem Recht der Bundesrepublik Deutschland;
jede Inhaber-Stückaktie hat einen rechnerischen Anteil am Grundkapital der
Gesellschaft von EUR 1.00 und mit vollen Gewinnbezugsrechten für das
Geschäftsjahr 2012 ausgestattet:

1.000.000 Inhaber-Stückaktien ohne Nennbetrag, die aus einer
Barkapitalerhöhung, die von der außerordentlichen Hauptversammlung
zu beschließen ist, resultieren.
Es wurden keine bestimmten Tranchen für eine spezielle Gruppe von
Investoren reserviert, auch eine Privatplatzierung ist nicht beabsichtigt.
Der Nennwert der 1.000.000 Aktien die Gegenstand des Angebots sind
entspricht einem Betrag von EUR 1.000.000,00 des Grundkapitals der
Gesellschaft.
Nach Durchführung und Eintragung der Barkapitalerhöhung, die durch eine
außerordentliche Hauptversammlung der Gesellschaft zu beschließen ist, und
die am _____ abgehalten wird, besteht das Grundkapital der Gesellschaft aus
bis zu 7.403.007 Akten.
Im Zusammenhang mit dem Angebot werden ungefähr 15,6% der Akten der
Gesellschaft angeboten. Die genaue Zahl der angebotenen Aktien wird am
____ auf der Webseite der Gesellschaft (www. Pacificretailmerchants.com) und
als Unternehmensmitteilung bekanntgegeben.
Im Zusammenhang mit dem Angebot wird die Gesellschaft die Netto-Erlöse
aus dem Verkauf der neuen Aktien erhalten.
Die Gesellschaft führt das Angebot im Wege der Eigenemission durch und der
Angebotspreis beträgt EUR 2,00 je angebotener Aktie. Der Angebotspreis
wurde von der Gesellschaft nach ihrer eigenen Bewertung unter Anwendung
von typischen Bewertungsmethoden wie Discounted Cash Flow festgelegt und
berücksichtigt einen Abschlag als Vergünstigung für Anleger.
Das Angebot wird in EUR bezeichnet und der Angebotszeitraum, in welchem
Anleger die Möglichkeit haben, Verkaufsangebote für die Aktien abzugeben,
beginnt voraussichtlich am 11. März 2011 und endet voraussichtlich am 01.
April 2013. Interessierte Anleger werden gebeten, hinsichtlich der weiteren
Einzelheiten des Angebots auf die Bekanntmachungen, die in den Medien, die
auf der Webseite der Gesellschaft veröffentlicht werden zu achten. Während
des Angebotszeitraums können Angebote zum Erwerb von Aktien
(„Zeichnungen“) an die Gesellschaft per Fax an die folgende Nummer
übersendet werden: 089/809 902 999. Am letzten Tag des Angebotszeitraums,
können private Investoren ihr Angebot bis 12:00 Uhr (Mitteleuropäische Zeit)
abgeben, institutionelle Investoren können ihre Angebot bis 16:00 Uhr
(Mitteleuropäische Zeit) abgeben. Zeichnungen sind nur zulässig unter den
folgenden Voraussetzungen: (i) das durch die Gesellschaft auf der Webseite
www.pacificretailmerchants.com zur Verfügung gestellte Formular wird benutz
und vollständig und korrekt ausgefüllt und (ii) der Zeichnungspreis wird
vollständig spätestens bis zum Ende der Zeichnungsfrist auf das im
Zeichnungsformular angegebene Konto der Gesellschaft überwiesen (Eingang
auf dem Gesellschaftskonto maßgeblich).
51
Die Gesellschaft behält sich das Recht vor, die Anzahl der insgesamt
angebotenen Aktien zu verringern und/oder den Angebotszeitraum zu
verlängern oder zu verkürzen. Sollte ein Parameter des Angebots verändert
werden, wird die Veränderung über ein elektronisches Informationsmedium und
auf der Webseite der Gesellschaft (www.pacificretailmerchants.com)
veröffentlicht. Diese Veröffentlichungen erfolgen in einem Nachtrag zu diesem
Prospekt, soweit sie nach den Vorschriften des Wertpapierprospektgesetzes
erforderlich sind. Es erfolgt keine individuelle Benachrichtigung von Anlegern,
die Kaufaufträge abgegeben haben. Jede Änderung der Anzahl der
angebotenen Aktien oder der Preise oder jede Verlängerung oder Verkürzung
der Angebotsdauer macht Kaufaufträge, die bereits abgegeben wurden, nicht
ungültig. Nach dem deutschen Wertpapierprospektgesetz haben Anleger die
vor Veröffentlichung eines Nachtrages bereits eine Kauforder abgegeben
haben, innerhalb eines Zeitraumes von 2 Arbeitstagen nach Veröffentlichung
des Nachtrages das Recht, von ihrem Kaufauftrag zurückzutreten. Anstelle
eines Rücktritts können Anleger, die einen Kaufauftrag erteilt haben bevor ein
Nachtrag veröffentlicht wurde, innerhalb von 2 Tagen seit Veröffentlichung des
Nachtrages, ihren Kaufauftrag ändern oder neue beschränkte oder
unbeschränkte Kaufaufträge erteilen. Anstatt von den Kaufaufträgen
zurückzutreten, haben Anleger auch das Recht ihren Kaufauftrag zu ändern,
den sie vor der Veröffentlichung des Nachtrages abgegeben haben oder
alternative einen neuen begrenzten oder unbegrenzten Kaufauftrag binnen
zwei Arbeitstagen nach Veröffentlichung des Nachtrages abzugeben.
Kaufaufträge sind bis zum Ende des Angebotszeitraums widerruflich.
Wenn der Angebotszeitraum abgelaufen ist, werden die angebotenen Aktien
den Anlegen auf Basis von deren Kaufaufträgen zugeteilt. Das
Angebotsvolumen wird voraussichtlich am 11. März 2013 auf der Webseite der
Gesellschaft und als Unternehmensmitteilung veröffentlicht.
Anleger die Kaufaufträge an die Gesellschaft gerichtet haben, können von der
Gesellschaft Informationen über die Anzahl der ihnen zugeteilten Aktien so früh
wie möglich aber nicht vor dem Bankarbeitstag der dem Ende des
Angebotszeitraumes folgt, erhalten.
Mehrfache Zeichnungen sind zulässig. Es gibt keinen Höchst- oder
Mindestzeichnungsbetrag. Einbuchung der zugeteilten Aktien erfolgt
wahrscheinlich am 08. April 2013. Die Gesellschaft behält sich das Recht vor,
Kaufaufträge ganz oder teilweise nicht zu akzeptieren, z.B. wenn das
Platzierungsvolumen nicht ausreicht um alle Kaufaufträge zu befriedigen.
E.4
Eine
Beschreibung
aller für den
Emittenten/das
Angebot
wesentlichen
Interessen,
einschließlich
Interessenkonfli
kten
Da die Gesellschaft die Erlöse aus dem Angebot erhält und diese die
Eigenkapitalbasis der Gesellschaft stärken, haben speziell die Aktionäre, die
vor Beginn des Angebots Aktien an der PRM halten („Bestehenden Aktionäre“)
ein Interesse daran, dass die Kapitalerhöhung, die Gegenstand dieses
Angebots ist, durchgeführt wird.
E.5
Name der
Person, des
Unternehmens,
das die
Wertpapiere
zum Kauf
anbietet
Die Aktien werden ausschließlich von der Gesellschaft im Wege einer
Eigenemission zum Kauf angeboten.
Lock-upVereinbar-
Die bestehenden Aktionäre haben mit der VEM Aktienbank AG eine
Vereinbarung getroffen, wonach diese für einen Zeitraum von sechs Monaten
52
ungen; die
beteiligten
Parteien und
Lock-up-Frist
seit Handelsbeginn („Lock-up-Periode“)



unmittelbar oder mittelbar Aktien der Gesellschaft oder Wertpapiere,
die in Aktien der Gesellschaft gewandelt oder umgetauscht werden
können oder zu deren Bezug berechtigen, anzubieten, zu verpfänden,
zuzuteilen, zu verkaufen, sich zu verpflichten zu verkaufen, eine
entsprechende Verkaufsoption oder einen auf Verkauf gerichteten
Vertrag zu kaufen, eine Kaufoption, -recht oder – versprechen
einzuräumen oder anderweitig zu übertragen oder zu veräußern;
einen Swap oder eine andere Vereinbarung abzuschließen, die das mit
dem Eigentum von Aktien der Gesellschaft verbundene wirtschaftliche
Risiko ganz oder teilweise auf einen anderen überträgt, gleichgültig ob
eine der beschriebenen Transaktionen durch Liefern von Aktien der
Gesellschaft oder derartige andere Wertpapiere, bar oder anderweitig
zu erfüllen ist;
eine Kapitalerhöhung der Gesellschaft zu initiieren, für eine solche zu
stimmen oder auf andere Weise zu unterstützen oder die Ausgabe von
Wertpapieren, die in Aktien der Gesellschaft gewandelt werden können
oder eine wirtschaftlich vergleichbare Transaktion.
Diese Veräußerungsbeschränkungen gelten nicht für Übertragungen von
Aktien der Gesellschaft, die als Teil des Angebots verkauft werden oder für
Aktien, die auf dem Regulierten Markt erworben werden.
E.6
Betrag und
Prozentsatz der
aus dem
Angebot
resultierenden
unmittelbaren
Verwässerung.
Im Fall eines
Zeichnungsang
ebots an die
existierenden
Anteilseigner
Betrag und
Prozentsatz der
unmittelbaren
Verwässerung
für den Fall,
dass sie das
Angebot nicht
zeichnen.
E.7
Schätzung der
Ausgaben, die
dem Anleger
vom Emittenten
oder Anbieter in
Rechnung
gestellt werden.
Der Eigenkapitalwert der Aktionäre zum 30 September 2012 beträgt, wie in den
IFRS Konzernabschlüssen der Giant Luxury Holdings Ltd. angegeben, TEUR
2.139. Dies entspricht in etwa EUR 0,33 pro Aktie (kalkuliert auf der Grundlage
von 6.403.007 Aktien -nach Durchführung der Sachkapitalerhöhung- zum
Datum des Prospektes).
Unter der Annahme, dass alle 1.000.000 Angebotsaktien platziert werden und
dass der Angebotspreis bei EUR 2,00 pro Angebotsaktie läge, was dem
Mittelwert der Preisspanne entspricht, ergäbe sich dadurch ein Nettoerlös von
ca. TEUR 1.500 für die Gesellschaft. Hätte die Gesellschaft diese Summe zum
30 September 2012 erreicht, wäre der Eigenkapitalwert der Aktionäre zu dieser
Zeit bei ca. TEUR 3.693 oder EUR 0,49 pro Aktie (basierend auf der erhöhten
Anzahl der 7.403.007 Aktien nach der Platzierung der 1.000.000
Angebotsaktien) gelegen. Aufgrund der oben erwähnten Annahmen, würde
eine Einführung des Angebots zu einem direkten Anstieg des Eigenkapitalwerts
der Aktionäre von EUR 0,16, oder 48,5% pro Aktie für den bestehenden
Aktionär und eine direkte Verwässerung von EUR 1,51, oder 75,5 % pro Aktie
für den Käufer der Angebots Aktien führen.
Keine.
53
RISK FACTORS RELATED TO PACIFIC RETAIL MERCHANTS AG AND ITS SUBSIDIARIES
Investors should carefully consider all of the information set out in this Prospectus and, in
particular, the risks described below before deciding on whether to purchase shares of the
Company.
The business, financial condition and results of operations of Pacific Retail Merchants AG (the
“Company” or “PRM”) and its subsidiaries (together with the Company “PRM Group”) could be
materially adversely affected, should any of these risks materialize, alone or in connection with
other circumstances. The market price of the Company’s shares could decline due to the
occurrence of any of these risks, and investors may lose all or part of their investment as a result
thereof. The risks described below are all substantial risks that the Company is aware of. Additional
risks and uncertainties of which the Company is currently not aware could also materially adversely
affect the business of PRM and could have material adverse effects on the business, financial
condition and results of operations of PRM. Investors should pay particular attention to the fact that
the operating entities of the PRM Group are incorporated in Hong Kong and governed by a legal
and regulatory environment which in various respects may differ from that of other countries.. The
order in which the following risk factors are presented does not reflect the likelihood of their
occurrence, nor the extent or significance of each individual risk.
Risks Related to PRM Group’s Business
PRM operates in a highly competitive market, which may result in a decline in its market
share and lower profit margins.
The consumer markets for traditional dried seafood and delicacies and Chinese herbal medicine
and health supplements in Hong Kong are characterized by intense competition, predominantly
from domestic brands and independent operators with a loyal local customer base. In addition to
these single location operators, PRM competes with a few small multi-site chain operators,
including The Kai Tai Group and Nam Pei Hung Sum Yung Drugs Company, Ltd. There could also
be new entrants in the market. The new and existing competitors may have greater financial
resources, better brand recognition and wider, more diverse and established distribution networks.
To compete effectively, PRM Group must continue to invest significant resources in establishing
new stores in high traffic areas and attractive locations, and stocking them with a variety of high
quality products. There can be no assurance that PRM Group will have sufficient resources to
make these investments or that such investments will improve its market position as compared to
its competitors.
Moreover, due to the increasing significance of the Chinese market for multinational companies,
international competitors may enter the Hong Kong market. This could lead to intensified
competition in the industry. Increased and intensified competition could result in lower margins or a
loss of market share, either of which could have material adverse effects on the business, financial
conditions, results of operations and business prospects of PRM.
PRM Group may not be able to maintain its position as a wholesale supplier within Hong
Kong’s dried seafood market.
In addition to supplying product to its own retail stores, PRM Group also manages a wholesale
operation for dried seafood and other products in the Hong Kong market. The general nature of
wholesale business is highly competitive and margins can be substantially lower than the retail
business. In addition, as a wholesaler, the Company is required to maintain larger inventories. The
payment terms of its wholesale customers are longer than its retail customers, who typically pay
cash at the time of purchase, which could impact the Company’s cash flow. Furthermore, as
wholesale transactions tend to be larger, default on payment would have a negative impact on the
Company’s cash flow, and in turn on its ability to secure additional inventories. PRM Group
attempts to reduce this risk by only entering into wholesale agreements with customers with whom
management has strong relationships; however there can be no assurances that the Company will
be able to minimize this risk which could have material adverse effects on the business, financial
conditions, results of operations and business prospects of PRM Group.
Success in the company’s business is measured by the ability to leverage scale in order to gain
pricing advantages and operating efficiencies, successfully service the independent customer base
and to use technology and other tactics to increase distribution efficiencies. PRM Group competes
with a few small regional food distributors, as well as directly with the suppliers of dried seafood
54
and other products that it relies upon for its own stores. There can be no assurances that the
Company will continue to be able to secure sufficient quantities and variety of product at a
satisfactory price and quality to ensure the ability to properly service wholesale customers, either of
which could have material adverse effects on the business, financial condition, results of operations
and business prospects of PRM Group.
PRM Group is dependent on its suppliers and disruptions in the supply of dried seafood or
increase of the prices could adversely affect its business operations.
The Company’s ability to secure high quality dried seafood products is solely dependent on a
variety of suppliers from around the world, including Australia, China, South Africa, Indonesia, the
Philippines and the South Pacific. These suppliers could be affected by a large number of factors,
including but not limited to, environmental factors, the availability of seafood stock, weather
conditions, water contamination, the policies and regulations of the governments of the relevant
territories where such fishing is carried out, the ability of the fishing companies and fishermen that
supply PRM Group to catch sufficient product to continue their operations and pressure from
environmental or animal rights groups. Such restrictions against fishing or unfavorable weather or
environmental conditions have a direct impact on the availability of dried seafood and related
products, and could lead to a shortage and/or an increase in the prices of PRM’s inventory either of
which could have material adverse effects on the business, financial condition, results of operations
and business prospects of PRM Group.
PRM Group’s inability to deliver quality products, poor product quality or product
contamination could lead to loss of sales, higher costs, negative publicity, and payment of
compensation to customers and/or product liability claims.
The Center for Food Safety and the Food and Environmental Agency’s Hygiene Department
supervise the importation of foods into Hong Kong, and as such all imports are inspected and batch
tested for quality. PRM Group’s procurement team also inspects the Company’s inventory on a
regular basis. However, many of the Company’s products are perishable in nature, may deteriorate
due to various reasons such as malfunctioning cold storage facilities, delivery delays or poor
handling. This may lead to a loss in revenue, costs incurred in the purchase of replacement
products and payment of compensation to customers, which could have material adverse effects
on the business, financial conditions, results of operations and business prospects of PRM Group.
PRM Group currently does not have product liability insurance, as management believes the
premiums for product liability insurance are high compared to the risk of claims. In the event that
the consumption of products sold in PRM Group’s stores causes harm, illness or death to a
consumer of a product purchased at any of the stores of the PRM Group, whether as a result of
product deterioration, spoiling, sabotage, willful action, omission or negligence, PRM may be liable
to complaints, lawsuits and claims from consumers of PRM Group products which in turn could
generate negative publicity and materially and adversely affect the business, financial condition,
operation and prospects of PRM.
The PRM’s Giant Luxury and Shang Yu Tang brands have a limited history in the industry.
PRM Group has a limited operating history in the dried seafood, herbal medicine and health
supplement industry; the business operations started in 2008, and the Giant Luxury and Shang Yu
Tang brands were not introduced to the market until 2011. While each of the individual stores and
management teams now operating under the Shang Yu Tang or Giant Luxury brand has an
average operating history of 20 years, there can be no assurance that PRM’s past results will be a
good indication of its future performance.
PRM Group also plans to establish new flagship stores as well as specialty stores and small retail
boutiques under its brands to enlarge its customer base and enhance its profitability. There can be
no assurance that the branded concept will achieve the anticipated growth, or even success. PRM
Group also may not be able to successfully integrate such new shops into its existing operations. If
PRM Group is unable to continue its successful operations under its brands or fails to succeed in
launching its planned new shop concept, its business, financial conditions, results of operations
and business prospects could be materially and adversely affected.
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As PRM relies on its brands, any failure to effectively promote and maintain its brands may
materially and adversely affect its business and results of operations.
In the Company’s view, brand recognition and consumer acceptance are key determining factors
for consumers in making purchasing decisions for products. As at the date of this Prospectus, PRM
sells all of its dried seafood, herbal medicine and health supplements in shops run under its Shang
Yu Tang brand. While each of the stores within the group have built strong customer relationships
and a reputation for product knowledge and quality, the Company’s ability to maintain and enhance
the market reputation of the Shang Yu Tang brand is critical to its success. PRM intends to further
increase its advertising and marketing spending in the future. If PRM is unsuccessful in promoting
its brands or fails to maintain its brand’s positions, the market perception and consumer
acceptance of its brands may suffer. In addition, since PRM also plans to promote its brands and
image through small selections of boxed merchandise in hotels and airports, it is dependent on the
market perception and consumer acceptance of such activities, variables over which PRM has no
full control. Should any of the above named risks materialize, this could have material adverse
effects on PRM’s business, financial condition, results of operations and business prospects.
Non-payment by customers resulting in operating losses
PRM Group’s business requires a significant inventory, personnel and resource effort. Any failure
of a wholesale customer to pay in whole or in part may lead to an operative loss.
For the wholesale aspect of its business, PRM Group has implemented certain measures to
mitigate its risk of payment default such as appropriate upfront payment requests and diligence in
taking on new customers. However, payment defaults may not be eliminated; such defaults may
have material adverse effects on the financial condition, results of operations and business
prospects of PRM.
PRM may not be able to adequately protect its intellectual property rights and its know-how,
and the sale of counterfeit products may adversely affect its brands and business.
PRM believes that its trademarks and other intellectual property rights are crucial to its success.
PRM’s principal intellectual property rights include its various trademarks as well as certain domain
names. PRM is currently in the application process for the registration of various trademarks in
Hong Kong. PRM depends, to a significant extent, on Hong Kong laws to protect its rights to
intellectual properties, in particular trademarks and domain names. Some of the trademarks used
by PRM may be successfully challenged, and the use of the challenged trademarks by PRM may
entail an increased possibility of a trademark dispute, which, in turn, may result in a prevention of
using the challenged trademarks by PRM in the future and a liability of damages payments for the
past use.
The protection of trademarks and domain names requires extensive monitoring and enforcement
efforts. Although PRM is not aware of any infringements upon any of its trademarks and domain
names, assurances cannot be made that third parties will not infringe upon such intellectual
property rights in the future. The legal framework governing intellectual property rights in the PRC
is still evolving and the level of protection of intellectual property rights in the PRC differs from the
one in other more developed jurisdictions, especially as far as the enforcement of intellectual
property rights is concerned. PRM’s measures to enforce or defend its intellectual property rights in
China may not be adequate and as effective as those applicable in more developed jurisdictions.
These legal proceedings may be time consuming and PRM may be required to devote substantial
management time and resources in its attempts to achieve a favorable outcome. There can be no
assurance that such legal proceedings will be successful. If PRM fails to timely identify any illicit
use of its trademarks, domain names and other intellectual properties, or if PRM is unsuccessful in
legal proceedings against any misappropriation of and infringements on its intellectual property
rights, this could damage the reputation of PRM’s brands and products and lead to a loss of profits,
which would materially and adversely affect PRM’s business, financial condition, results of
operations and business prospects.
Being dependent on suppliers for all of its products, PRM may not be able to ensure that the
products provided by its suppliers meet its requirements, nor may it be able to secure
products from additional qualified suppliers in the future.
PRM Group relies on suppliers for all of its seafood, herbal medicine and health supplement
products and its reliance on suppliers may grow as a result of increased demand for its products.
Inasmuch as some of the products sold at the Stores are rare, particularly those of the highest
quality, PRM may not always be able to find additional suppliers that meet its strict standards.
56
Moreover, suppliers may not always be able to provide PRM with products of sufficiently high
quality, sufficient quantity, in a timely manner and at a competitive price.
In addition, as some of PRM’s suppliers also supply products for competitor companies, these
suppliers may not treat PRM’s purchase orders as a priority when allocating their supply capacity to
their various customers. If any of the above risks were to materialize, PRM might not be able to
deliver products to its distributors on a timely basis or at all, which could materially and adversely
affect its business, financial condition, results of operations and business prospects.
PRM Group’s brand image and business may be negatively affected by actions of its
suppliers.
PRM Group places great emphasis on the market recognition and reputation of its brands, and
therefore strives to strictly adhere to all relevant laws, rules and regulations, particularly in respect
of labor relations and environmental protection. But as PRM’s suppliers operate independently from
it, PRM is unable to ensure their compliance with applicable laws and regulations. If its suppliers
fail to comply with applicable laws and regulations, this may result in a negative and detrimental
public perception of PRM and its brands, which could have material adverse effects on PRM’s
business, financial condition and business prospects.
PRM Group depends significantly on its senior management.
PRM Group’s success to date has to a large extent been attributable to the leadership and vision of
its senior management team. PRM Group’s future success will therefore be determined to a
significant extent by the continued service of its senior management personnel.
The business network and industry experience of key management personnel are of particular
importance to PRM Group’s business. If any of PRM Group’s key management personnel were
unable or unwilling to continue in their present positions, PRM may be unable to identify and recruit
suitable replacements in a timely manner, or at all. In addition, if any key management members of
PRM were to join a competitor or to form a competing company, PRM may lose some of its knowhow and customers. PRM has not entered into confidentiality and non-competition agreements with
its key personnel; therefore, it cannot be guaranteed that PRM will be able to prevent its key
personnel from moving to competitors or forming a competing company and utilizing their knowhow to compete with PRM. PRM Group does not maintain insurance with respect to the loss of its
key personnel, which could have material adverse effects on PRM Group’s business, financial
condition and business prospects.
PRM Group’s historical financial performance should not be used as an indicator for its
future financial performance.
PRM Group has experienced significant revenue growth in the financial year 2009, 2010 and 2011.
The number of PRM Group’s retail stores grew from 2 as at 31 December 2009, to 10 as at 31
December 2011, throughout Hong Kong. There can be no assurance that PRM will be able to
maintain the expansion rate of the number of PRM retail stores at historical levels and to effectively
manage the expansion of its store presence.
Furthermore, PRM Group may fail to maintain its annual revenue growth if it is unable to sustain
and effectively manage the rapid expansion of its retail and wholesale networks. All of the
foregoing could have material adverse effects on PRM’s business, results of operations, financial
condition and business prospects.
PRM Group’s margins and profitability may be adversely affected as a result of increased
costs.
The limited supply and high quality of dried seafood and related products sold in the Company’s
stores is reflected in PRM’s premium but competitive pricing. Any increase in the price of products
sourced by PRM may decrease its operating profits if the Company is unable or unwilling to pass
on all or part of the increased costs to its customers, which could materially and adversely affect its
business, financial condition, results of operations and business prospects.
PRM Group’s labor costs have risen significantly in recent years and could continue to rise
at a comparable rate or even faster.
The retail industry is labor intensive, and the entire workforce of PRM is located in Hong Kong.
Labor costs in Hong Kong have been increasing rapidly in recent years. In 2010, the average wage
per capita of employees of private enterprises in Hong Kong increased by approximately 6.9%
57
compared to 20091. The minimum wages for workers in the Hong Kong, where PRM’s Stores are
located, came into effect in May 2011. The current statutory minimum wage rate is HKD 28 per
hour, and is likely to increase further.
As for payroll, the index of payroll per person engaged for all the industry sections surveyed 2 in
nominal terms from June 2009 to June 2012 over a year earlier:
June 2009
Decreased by 0.7 %
June 2010
Increased by 4.9 %
June 2011
Increased by 6.9 %
June 2012
Increased by 6.6 %
Moreover, additional obligations imposed on employers and enhanced employee protection
measures, including restrictions on the dismissal of employees, and a requirement to provide
severance pay in case of termination of employment agreements are also likely to lead to an
increase in PRM’s labor costs.
In the future, labor costs could continue to increase significantly and additional legislation could be
enacted that would further increase the burden on the Company as regards to benefits payable to
employees. PRM’s intention is to substantially expand its workforce as a result of its growth
strategy, any further increase in labor costs and employee benefits may have a material and
adverse effect on its business, financial condition, results of operations and business prospects.
PRM’s future success depends on the successful recruitment and retention of qualified
personnel.
As PRM’s business continues to grow, it will need to recruit additional qualified personnel. There is
substantial competition for qualified personnel in Hong Kong’s retail and wholesale industries, and
PRM expects competition for qualified personnel to intensify due to increased competition in the
industry as a whole. Several competitors of PRM operate stores in the same general location as
the Company, which leads to increased competition for skilled personnel. PRM may therefore be
unable to find suitable replacements for key personnel that might leave PRM in the future.
PRM's future success will depend upon its ability to attract and retain qualified senior and mid-level
management personnel and qualified staff, in particular, for its retail stores and marketing divisions,
to develop and expand its operations. There can be no assurance, however, that PRM will be able
to procure the services of the personnel necessary for its growth and success, especially in light of
the increasingly competitive labor market in Hong Kong. In recent years, the scarcity of qualified
personnel in Hong Kong has led to a substantial increase in wages for such personnel. Further
increases could lead to significantly higher costs for senior management personnel and other
qualified staff. If PRM is unable to recruit qualified personnel or if the wages increase significantly,
this could have a material adverse effect on PRM’s business, financial condition, results of
operations and business prospects.
1
Hong Kong Census and Statistics Department,
http://www.statistics.gov.hk/pub/B10500092012QQ02B0100.pdf
2
Hong Kong Census and Statistics Department - http://www.censtatd.gov.hk
58
Employee misconduct
PRM Group runs the risk that employee misconduct could occur. Misconduct by employees could
include binding PRM or its subsidiaries to transactions that exceed authorized limits or present
unacceptable risks, or hiding unauthorized or unsuccessful transactions from PRM Group, which, in
either case, may result in unknown or unmanaged risks or losses. The Company does, however,
have internal controls in place, which it believes will mitigate this risk. Employee misconduct could
also involve improper use of confidential information, which could result in regulatory sanctions and
serious reputational harm. It is not always possible to prevent employee misconduct and the
precautions, which PRM Group takes to prevent and detect this activity, may not be effective in all
cases. In addition, as PRM grows, such precautions may need to be updated and/or expanded to
increase their effectiveness. Failure to do so, or to do so in a timely fashion, may lead to such
precautions becoming ineffective, or less effective, against the risks against which it is intended
they mitigate.
Such employee misconduct and/or the lack of insurance coverage for such employee misconduct
may have a material adverse effect on the Company’s business, financial condition, results of
operations and future business prospects.
PRM may fail to implement its growth strategy and production expansion plan successfully.
As of 30 June 2012 PRM had established a s network in Hong Kong comprising nine exclusive
shops located throughout the city, and one wholesale distribution warehouse. PRM plans to
strengthen its presence and position in Hong Kong. As part of its growth strategy, PRM plans to
open two new types of retail stores: flagship stores where customers can purchase all of PRM’s
products and specialty stores which feature the most valuable and luxury items. However, the new
flagship and specialty stores may not perform according to expectations, which, in turn would result
in low utilization rates or higher costs than expected. Even though PRM has extensive experience
in retail operations it may not be able to effectively and efficiently implement and manage its new
retail and wholesale concepts or that the flagship store and specialty store concepts will be
successful and cost-effective. PRM has also formulated a growth strategy to enhance its brand
images and sales coverage in order to increase its revenue growth and profitability. PRM’s
business expansion has, and will continue to, put pressure on its managerial, financial, operational
and other resources, and in particular on its internal accounting and financial reporting processes
and systems. As its operations expand, PRM expects that additional resources will be required to
identify, recruit, train and integrate additional employees, oversee the expansion of its facilities, set
up and manage its proprietary outlets as well as implement an effective management information
system.
In addition, PRM may fail to execute its growth strategy due to its inability to obtain adequate
funding. So far, PRM has financed its working capital and capital expenditure needs primarily from
operational cash flows and through capital contributions by shareholders. PRM expects its working
capital needs and its capital expenditure needs to increase in the future as it implements its growth
strategy. PRM’s ability to raise additional capital will depend on the financial success of its current
business and the successful implementation of its key strategic initiatives as well as financial,
economic and market conditions as well as other factors, some of which are beyond its control.
There can be no assurance that PRM will be successful in obtaining the required funding at a
reasonable cost and at the required time, or at all.
A failure of PRM to successfully execute any of the foregoing strategies could have material
adverse effects on its business, financial condition, results of operations and business prospects.
PRM may be exposed to product liability, property damage or personal injury claims, and
the insurance coverage of PRM may not be adequate to cover all potential liability or losses.
PRM maintains third-party liability insurance against claims for property damage and personal
injury. However, all insurance contracts have a limited term only and some will expire in the near
future. If such insurance policies are not renewed, regardless of the ultimate merits of a claim or
dispute, PRM may face significant costs and expenses incurred in defending itself against such
claims or in entering into settlement agreements and PRM may suffer serious damage of its
reputation, be subject to material monetary damages, and be subject to government investigations
as a result. Such cases may lead to fines and sanctions against PRM and furthermore may result
in a negative public perception of its brands.
PRM has property insurance for its Stores leased throughout Hong Kong and for its leased office
building. However, such insurance may not be sufficient to cover all potential liability or losses of
PRM. Additionally, natural disasters and/or other events outside the control of PRM could result in
59
substantial losses and the inability to repair damages in a timely manner, or at all, causing
significant harm to PRM’s operation and profitability. PRM does not maintain business interruption
insurance. PRM may also become subject to liabilities for other events that cannot be insured
against or against which it may elect not to be insured against because of the costs associated with
high premiums or any other reasons. PRM does not separately set aside reserves or make
provisions for any uninsured insufficiently insured events.
The occurrence of these events or of any of the above mentioned risks may expose PRM to
substantial risks and could materially and adversely affect its business, financial condition, results
of operations and business prospects.
The Company’s management board (Vorstand) is not experienced in complying with
German legal requirements, and PRM has not yet implemented a comprehensive corporate
compliance system.
PRM has until recently operated as a private Hong Kong company and maintains a small finance
and accounting department. PRM is therefore not experienced in dealing with increased legal,
accounting, transparency and administrative requirements imposed on a publicly listed company in
Germany. The requirement to comply with certain reporting, notification and publication obligations
resulting from the inclusion of the Company’s shares to trading on the Regulated Market of the
Frankfurt Stock Exchange, will put increased demand on PRM’s compliance, finance and
accounting departments. If PRM fails to comply with the obligations it faces as a publicly listed
company or fails to timely issue complete and correct financial reports and accounts, it will
potentially be subject to fines and penalties and a decrease in investor confidence, which in turn
may result in a decrease of its share price.
PRM has not yet established a comprehensive and formalized risk reporting and risk management
system. The absence of having such a system in place increases PRM’s susceptibility to the
aforementioned risks. In addition, any gaps or shortcomings of the existing compliance and
corporate governance systems could lead to a restriction of PRM’s ability to timely recognize and
respond to risks and future developments. Such developments may have a material adverse effect
on the Company’s business, financial condition, results of operations and business prospects.
The Company’s supervisory board (Aufsichtsrat) may have difficulties in adequately
supervising the management board (Vorstand) since members of the two boards reside in
different countries.
Substantially all of PRM Groups operations and assets are located in Hong Kong, and most of its
senior management members and directors reside there. The Company is currently a holding
company without any significant operational business of its own. One member of the supervisory
board resides in Germany, and it may be difficult for said member of the supervisory board to fulfill
his supervisory duties arising from the German Stock Corporation Act vis-à-vis the management
residing in Hong Kong. In particular, it may be difficult for this member of the supervisory board to
receive in a timely manner all documents that are required to inspect and examine the books and
the records of the Company. These circumstances could result in material adverse effects on the
Company’s business, financial condition, results of operations and business prospects.
PRM Group may be involved in disputes and litigation
PRM Group may be involved in disputes with various parties, such as customers, suppliers,
competitors and authorities. Such disputes may lead to legal, administrative and other proceedings
and my result in damage to PRM Group’s reputation, additional operational costs and a diversion of
resources and management’s attention from PRM Group’s core business activities. PRM Group
cannot assure that it will not be involved in such legal proceedings in the future or that the outcome
of these proceedings will not materially and adversely affect its business, its financial condition,
results of operations and business prospects.
PRM’s performance in the future is dependent on the Hong Kong economy. Changes in
consumer spending patterns could materially affect the Company’s growth and profitability.
PRM derives its revenue substantially from sales of its products in Hong Kong, however the
success of PRM’s business depends on the condition and growth of the Hong Kong consumer
markets, which in turn depend on macro-economic conditions and individual income levels in Hong
Kong. Consumer spending patterns may be adversely affected by, among other factors, business
conditions, interest rates, taxation, local economic conditions, uncertainties about future economic
prospects and shifts in discretionary spending toward other goods and services. Consumer tastes
and preferences and economic conditions may differ or change from time to time in the market in
which PRM operates.
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There is no assurance that projected growth rates of the Hong Kong economy or the Chinese and
Hong Kong consumer markets will be realized. PRM may not be able to maintain its historical rates
of growth in net sales and net income, or remain profitable, particularly if the retail environment is
stagnant or declines. Further, a recession in the general economy or uncertainties regarding future
economic prospects could affect consumer’s spending habits and may have a material adverse
impact on the business, financial condition, results of operations and business prospects of PRM.
Economic instability in China could adversely affect PRM’s business.
While the Company’s current operations are limited to Hong Kong, a large percentage of Hong
Kong is a Special Administrative Region of the PRC, and therefore China’s economic condition can
have a direct impact on Hong Kong, and therefore the Company. In addition, a large number of
customers in PRM Group’s stores are Chinese tourists.
The Chinese economy differs from the economies of most developed countries in a number of
aspects, including the amount of government involvement, the level of development, the growth
rate, the control of foreign exchange, and the allocation of resources. In the past, Chinese
economic reforms have generally led to increased economic growth. While the Chinese economy
has grown significantly over the past 30 years, the growth has not been balanced among the
different parts of the country nor during different periods of time. There can be no assurance that
the Chinese economy will continue to grow as it has in the recent past, or that if there is growth,
such growth will be steady and uniform, or that if there is a slowdown, such slowdown will not have
a negative effect on PRM’s business. Potential risks for the Chinese economy include, among
other things, significant declines in gross domestic product, an unstable currency, hyperinflation,
high government debt relative to gross domestic product, rising unemployment due to further
privatization of state-owned enterprises, a weak banking system providing limited liquidity to
domestic enterprises, and rising costs caused by environmental damages. The occurrence of one
or several of these risks could have material adverse effects on the business, financial condition,
results of operations and business prospects of PRM.
The PRC’s tourism policies contain inherent uncertainties.
Approximately 50% of PRM Group’s revenues are currently generated by sales to Chinese tourists
visiting Hong Kong. In July 2003, six years after sovereignty over Hong Kong reverted to China, the
Chinese Government implemented the Individual Visitor Scheme (“IVS”) policy, permitting the
residents of specified cities within Mainland China to travel to Hong Kong as free individuals. New
cities are being added to the list regularly, and Hong Kong and Macau have become popular tourist
destination for Chinese travelers.
From 2009, people from certain cities such as Shenzhen can travel without restrictions to Hong
Kong on a yearly visa. While prior to IVS, Mainland residents could only visit Hong Kong and
Macau on business visas or in group tours, and were required to follow a pre-approved itinerary,
today they are free to travel and shop throughout Hong Kong. However, if the PRC should change
its view on travel between China and Hong Kong, restricting the flow of tourism, it could have
material adverse effects on PRM’s business, financial condition, results of operations and business
prospects.
Risks Related to the Offering
The Offering may not result in an active and liquid market for the Company’s shares.
No assurance can be given that liquid trading in the shares of the Company will develop after the
Offering and that the stock exchange price will not fall below the offer price. The offer price for the
shares will be determined by way of a book-building procedure and will not necessarily provide any
indication of the stock exchange price at which the shares will subsequently be traded on the
Frankfurt Stock Exchange or on any other exchange. The Company cannot make forecasts as to
the extent that investors’ interest in its shares will foster trading, nor whether a liquid trading market
will develop. The stock exchange price of the Company's shares could become subject to greater
volatility and therefore buy and sell orders might be executed less efficiently. Under certain
circumstances, investors might not be able to sell their shares at the purchase price set for the
Offering or at a higher stock exchange price; or they might not even be able to sell them at all.
The market price for the Company’s shares may be volatile.
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Following the Offering, the market price of the Company’s shares may be highly volatile and may
not always accurately reflect the underlying value of the Company’s business. Factors such as,
inter alia, variations in the Company’s revenue, earnings and cash flows, the failure to meet
analysts’ expectations, announcements of new investments, strategic alliances and/or acquisitions,
fluctuations in real estate prices in Hong Kong as well as changes in Hong Kong laws and
regulations could cause the market price of the Company’s shares to change substantially. The
general volatility of stock exchange prices could also exert pressure on the market price of the
Company’s shares, and it is therefore possible that the Company’s shares will be subject to
changes in price that may not be directly related to PRM’s financial and business performance or
its business prospects.
The sale, or perceived sale of shares by the Existing Shareholders could adversely affect
the market price of the Company’s shares.
As a result of future sales of substantial amounts of shares in the public market, the market price of
the Offer Shares could decline substantially. Upon completion of the Offering (assuming that all
Offer Shares are placed), _______ (“Existing Shareholders”) will hold approximately ___% of the
Company’s shares. The Existing Shareholders have agreed with VEM Aktienbank AG that, for a
period of six months after the date of commencement of trading in the Company’s shares, they will
not offer, pledge, sell, contract to sell, sell an option to buy, buy an option to sell or otherwise,
directly or indirectly, transfer or dispose of shares of the Company or other securities that are
convertible into or exchangeable for shares of the Company; enter into swap transactions or
transactions that transfer the economic risk of holding the shares to a third party, in whole or in
part, regardless of whether any such transaction is to be settled by delivery of shares, payment in
cash or other consideration, as well as; initiate, vote in favor of or in any other way support a capital
increase of the Company or issuance of shares which are exchangeable into shares of the
Company or an economically equivalent transaction.
The Company can, however, not give any assurances that the existing shareholders will always
observe and comply with this undertaking and/or that VEM Aktienbank AG will be in a position to
enforce that market protection agreement.
The Offering may not be carried out in full, which may negatively affect the growth
prospects of PRM and/or the liquidity of the shares in the market.
This Offering relates to 1,000,000 ordinary bearer shares i.e. New Shares. Thus, in case all of the
1,000,000 Offer Shares are allotted to investors, the Company's free float will amount to
approximately 53 % of its total share capital. However, the actual number of Offer Shares that will
be allotted to investors, i.e. the placement volume, will be jointly determined by the Company and
the Sole Global Coordinator based on the orders received using the order book prepared during
the book building process, and will also depend on the offer price and certain allotment criteria.
There is no guarantee that all of the Offer Shares will eventually be placed with investors. If the
amount of New Shares placed with investors is significantly lower, resulting in lower net proceeds
than envisaged, the Company may not be able to fund certain of the investments for which it
intends to use the proceeds from this Offering in full or at all which may affect the Company's
growth strategy. In addition, if the overall placement volume is significantly lower than the number
of Offer Shares which form the subject matter of the Offering, the free float will be significantly
lower than the percentage stated above, which may have a material adverse effect on the
tradability of the shares and on the shareholder structure of the Company.
The materialization of any of the above risks could have a material adverse effect on the value of
the shares of the Company.
Investors engaging in short sales may not be able to financially cover these sales through
the delivery of shares.
The Listing Agreement provides that VEM Aktienbank AG may terminate the agreement given
certain preconditions. Should the Listing Agreement be terminated, the Admission to Trading will
not take place. If investors have engaged in so-called “short sales”, they will bear the risk of not
being able to financially cover these sales through the delivery of the shares.
The Company’s shares have not yet been publicly traded, and there is no guarantee that a
liquid market will develop or continue following the initial public offering.
Prior to the offering described in this Prospectus, there was no public trading in shares of PRM.
There is no guarantee that the offer price will correspond to the price at which the shares are
subsequently listed after the offering or that a liquid market in the shares will develop and become
established after this offering. The fact that existing shareholders will continue to hold at least
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approximately 75% of the Company’s share capital even after a complete implementation of the
capital increase under the Offering, limits the number of freely floating shares in the Company and
could, therefore, adversely affect the development and maintenance of a liquid market in the
shares. Investors may not be able to sell the shares at the offer price, at a higher price or at all
under certain circumstances.
The price and trading volume of the Company’s shares could fluctuate significantly, and
investors could lose all or part of their investments.
Following completion of the offering, the price of the shares in PRM may be subject to substantial
fluctuations, especially as the result of changes in the actual or forecast operating results of PRM
Group or its competitors, changes in the profit forecasts or failure to meet profit expectations of
investors and securities analysts, differences between the actual and the forecast published
portfolio value of the holdings, assessments by investors with regard to the success and the effects
of the offering and the strategy described in this Prospectus as well as the assessment of the
related risks, changes in the general economic conditions, changes in the shareholders as well as
other factors. Furthermore, external factors such as changing demand in the dried seafood market,
monetary or interest rate policy measures by central banks, regulatory changes or other external
factors, seasonal influences or unique events can impact the revenues and the earnings of PRM
and lead to fluctuations in the price for the shares of PRM. General fluctuations in share prices,
especially for shares in other financial services companies, or a general deterioration in capital
markets, can lead to pressure on the price of the shares of PRM, and these fluctuations in share
price are not necessarily based on the business operations or the earnings prospects of PRM.
Future capital measures could significantly dilute existing PRM shareholders and cause the
share price to decline.
PRM may in the future require additional capital to finance its business and growth. The Company
may take measures to obtain additional capital, such as a share issue following the exercise of
conversion rights or options under convertible bonds or bonds with warrants which are not yet
issued, or the acquisition of other entities or investments in other companies paid for by shares in
the Company, or a share issue in relation to employee participation programs. Such measures can
lead to a dilution of the shareholders or to material adverse effects on the price of the shares of the
Company, particularly if such measures exclude subscriptions by shareholders.
The Offering might not be completed; in which case investors could lose security
commissions paid and be exposed to risks from any short selling of the shares.
The Company may decide to cancel the Offering, e.g. due to adverse capital market conditions. In
this case investors will not have a claim for delivery of the shares in PRM. If an investor has
engaged in short selling, the investor bears the risk of not being able to fulfill its delivery
obligations.
The Company’s ability to pay dividends will depend in part on the transfer or distribution of
profits from its subsidiaries.
In accordance with applicable law, the Directors decide on the payment of dividends. This decision
is based on the balance sheet profit and the PRM’s solvency.. In order to determine the balance
sheet profit available for distribution, the annual financial profit or loss must be adjusted with the
profit/loss carry forward from the previous year as well as any withdrawals or contributions made to
the reserves. The Company’s ability to pay dividends depends on its ability to generate income and
on the existence of distributable reserves. Certain reserves must be established by law and have to
be deducted when calculating the balance sheet profit available for distribution. Since the Company
primarily functions as a holding company and its ability to generate income is dependent on the
ability of its operating subsidiaries to generate income and transfer profits, the Company’s ability to
pay dividends depends on the transferability of profits and distributable reserves of its subsidiaries.
Moreover, the Company’s ability to pay dividends may also be influenced by regulatory
requirements or measures, in particular with regard to PRM’s capitalization and solvency, which
may comprise orders prohibiting distributions to shareholders at the subsidiaries’ or Company’s
level.
PRM Group’s historical earnings and other historical financial data are not necessarily
predictive of earnings or other key financial figures of PRM and its subsidiaries going
forward.
63
The financial information discussed in this Prospectus and the financial statements of the Company
printed in the financial section of this prospectus relate to the past performance of PRM Group. The
future development of PRM Group could deviate significantly from past results due to a large
number of internal and external factors. The historical earnings and other historical financial data of
PRM Group are therefore not necessarily predictive of earnings or other key financial figures for the
Company going forward.
PRM Group will face additional administrative requirements and incur higher ongoing costs
as a result of the initial public offering.
After the offering, PRM will for the first time be subject to the legal requirements for German stock
corporations listed on the regulated market of a public exchange. These requirements include
periodic financial reporting and other public disclosures of information (including those required by
the stock exchange listing authorities and the German Securities Trading Act –
Wertpapierhandelsgesetz, WpHG), regular calls with securities and industry analysts, and other
required disclosures. There is no guarantee that PRM’s accounting, controlling, legal or other
corporate administrative functions will be capable of responding to these additional requirements
without difficulties and inefficiencies that cause PRM to incur significant additional expenditures
and/or expose it to legal, regulatory or civil costs or penalties. Furthermore, the preparation,
convening and conducting of general shareholders’ meetings and the Company’s regular
communications with shareholders and potential investors will entail substantially greater expense.
Management of PRM will need to devote time to these additional requirements that it could
otherwise devote to other aspects of managing the operations of the Company and these additional
requirements could also entail substantially increased time commitments and costs for the
accounting, controlling and legal departments and other administrative functions. Any inability of
PRM’s administrative functions to handle the additional demands placed on PRM by becoming a
company with listed shares as well as any costs resulting therefrom may have a material adverse
effect on the business, results of operations and financial condition of PRM.
There may be too little liquidity in PRM’s shares
The future success and liquidity of the market for the Company’s shares cannot be guaranteed.
Due to the comparatively small size of the Company and its operations, the market in the
Company’s shares may be relatively illiquid or subject to fluctuation. It may therefore be more
difficult for investors to realize their investment in the Company. There can be no assurance that
the trading in the Company’s shares will prevail at satisfactory and sufficient liquidity levels, which
can have a negative impact on the Company’s share price and tradability of its shares over the
stock exchange.
Risk of short sales before delivery of shares
The Company has entered into an engagement agreement with VEM Aktienbank AG, who may
terminate the agreement given certain preconditions. In this case and if the Company cannot find
another sole global coordinator, the Offering with subsequent listing on a regulated market will not
take place. If investors have engaged in so-called “short sales”, they will bear the risk of not being
able to financially cover these sales through the delivery of the shares.
PRM’s management will after the Offering indirectly still hold a significant portion of the
share capital of the Company which will enable it to exercise significant control over PRM
and could create conflicts of interest.
Immediately upon the completion of the Offering, i.e. after the registration of the implementation of
the IPO Capital Increase and the placement of the Offer Shares amongst investors, assuming
placement of all Offer Shares, Mr. Chung Wing Chin directly, and Mr. Wong Wai Keung indirectly
through Sunever Ltd. hold approximately 20.31% and 9.34%, respectively, of the Company’s share
capital and voting rights. Through their shareholdings, Messrs. Chung and Wong will individually
and, jointly with Sunever Group Ltd., be in a position, irrespective of the voting behavior of other
shareholders, to exercise considerable influence at the General Shareholders’ Meetings, and
consequently, over decisions regarding measures which are presented for a vote at the General
Shareholders’ Meetings (including the approval of important capital measures). Messrs. Chung and
Wong interests as major shareholders could conflict with their duties as management to act in the
best interests of the Company and/or the interests of other shareholders and they could exercise
his influence over the Company to the detriment of the Company and/or other shareholders, which
could have material adverse effects on the business, financial condition, and results of operations
of PRM.
64
Future sales or market expectations of sales of a large number of shares by certain
shareholders could cause the share price to decline.
Upon completion of the offering, Messrs. Chung and Wong will continue to hold approximately 30%
of the Company’s share capital assuming a complete implementation of the capital increase under
the Offering. The Company’s share price could fall substantially if Messrs. Chung and/or Wong or
other shareholders sell their shares after the selling restrictions in the lock-up agreement have
expired or at an earlier date or if such sales are anticipated by investors. This also applies if other
significant shareholders sell shares in the market or if such a sale is expected.
In addition, the sale or market expectation of a sale of a large number of shares by Messrs. Chung
and/or Wong or other significant shareholders could make it difficult for the Company to issue new
shares in the future on favorable terms.
GENERAL INFORMATION
Responsibility for the Content of the Prospectus
Pacific Retail Merchants AG, with its registered office in Munich and its postal address at
Rosenheimer Str. 145e, 81671 Munich (“PRM” or the “Company”, together with its direct and
indirect subsidiaries, “PRM-Group”) together with VEM Aktienbank AG, Prannerstr. 8, 80333
Munich, Germany (“VEM” or the “Bank”) as applicant for the admission to trading of the Company’s
securities in the regulated market of the Frankfurt Stock Exchange assume responsibility for the
contents of this prospectus (the ”Prospectus”) pursuant to Section 5, para. 4 of the German
Securities Prospectus Act (Wertpapierprospektgesetz) and declare that to the best of their
knowledge all information contained in the Prospectus is correct and that no material facts have
been omitted.
Subject Matter of this Prospectus
For the purpose of the public offering, this Prospectus relates to a total of 1,000,000 no par value
ordinary bearer shares, each with a notional amount of the share capital of EUR 1.00 and each
share vested with full dividend rights for the financial year beginning January 1, 2013. The shares
which are subject to the public offering consist of:
 1,000,000 no par value ordinary bearer shares which emanate from a capital increase
against cash contribution pursuant to a resolution to be adopted by the extraordinary
shareholders’ general meeting (Hauptversammlung) (the “New Shares” or the “Offer
Shares”);
For the purpose of admission to trading on the regulated market (Regulierter Markt) of the Frankfurt
Stock Exchange in the Regulated Market (General Standard), this Prospectus relates to a total of
up to 7,403,007 no par value ordinary shares. Each of the Offer Shares is vested with full dividend
rights for the financial year beginning on January 1, 2013.
Forward-Looking Statements
This Prospectus contains certain forward-looking statements, which relate to the business, the
financial development, and the results of operations of PRM as well as the business divisions in
which PRM operates. Forward-looking statements relate to future facts, events and other
circumstances, which are not historical facts.
In particular, this applies to statements containing information on future financial results, plans, and
expectations regarding the business and management of PRM, its growth and profitability, and
general economics and regulatory conditions, and other factors affecting PRM.
Forward-looking statements are based on current estimate and assumptions made by the
Company to the best of its knowledge. Such forward-looking statements are based on assumptions
and are subject to risk, uncertainties and other factor that could cause the actual financial condition
and results of PRM to differ materially from and fail to meet the expectations expressed or implied
by such forward-looking statements. The business of PRM is subject to a number of risks and
65
uncertainties that could also cause a forward-looking statement, estimate or prediction to become
inaccurate. Accordingly, prospective investors are strongly advised to read the sections of the
Prospectus, “Summery” “Risk Factors”, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations”, “Industry Overview”, “Business”, “Regulatory Environment”,
and “Recent Developments and Outlook”, which contain a detailed description of factors that have
an impact on the business of PRM and the market in which PRM operates.
In lights of these risks, uncertainties and assumptions, it is possible that the future events
mentioned in this Prospectus may not occur, and that forward-looking estimates and forecasts
derived from third-party studies reproduced in this Prospectus may prove to be inaccurate (see:
“General Information – Information Derived from Third Parties”). Moreover, neither the Company
nor the Underwriters assume any obligations, except as required by law, to update any forwardlooking statements or to conform such forward-looking statements to future events or
developments.
Information Derived from Third Parties
This Prospectus contains numerous references to statistical information, data and studies prepared
by third parties. Unless otherwise indicated, statements in this Prospectus regarding the market
environment, market developments, growth rates, market trends and the competitive situation in
the markets and segments in which the companies of the PRM Group operate are based on data,
statistical information, sector reports and third-party studies as well as on Company estimates. In
drafting the Prospectus, the following sources were used:

The Hong Kong Tourism Board (HKTB), Tourism Performance in 2011, which can be found
at: http://www.tourism.gov.hk/english/statistics/statistics_perform.html, cited as HKTB
Tourism Performance;

Jeffrey Chang: What is the market structure of the dried seafood market in Sheung Wan Hong Kong? which can be found at http://www.tuition.com.hk/dried-seafood-hong-kong.htm,
cited as: Jeffrey Chang: What is the market structure of the dried seafood market in Sheung
Wan - Hong Kong?

Hong Kong Tourism Board (HKTB) VISITOR ARRIVALS which can be found at
http://202.85.167.201/pnweb/jsp/doc/listDoc.jsp?doc_id=139521, cited as HKTB Visitor
Arrivals;

KPMG Advisory (China) Limited: China’s Pharmaceutical Industry, Poised for the Giant
Leap, 2011, cited as KPMG, China’s Pharmaceutical Industry, 2011;

The Government of Hong Kong Census and Statistics Department Population overview, can
be found at http://www.censtatd.gov.hk/hkstat/sub/so20.jsp, cited as Census and Statistics
Department Population Overview;

The Government of Hong Kong Census and Statistics Department, Quarterly Report of
Wage
and
Payroll
Statistics,
June
2012,
which
can
be
found
at http://www.statistics.gov.hk/pub/B10500092012QQ02B0100.pdf, cited as Census and
Statistics Department Wage and Payroll Overview;

Bundesverband deutsche Banken, Currency Converter, can be
http://www.bankenverband.de/waehrungsrechner, cited as Currency Converter;

The Government of Hong Kong, Introduction and Empirical Data, which can be found at
http://www.gov.hk/en/about/abouthk/facts.htm, cited as Government of Hong Kong
Introduction.
found
at:
To the extent that information has been sourced from third parties, this information has been
accurately reproduced by the Company in this Prospectus and, as far as the Company is aware
and is able to ascertain from information published by these third parties, no facts have been
omitted which would render the reproduced information inaccurate or misleading. However, market
studies and analyses are frequently based on information and assumptions that may not be
accurate or technically correct, and their methodology is by nature forward-looking and speculative.
The Company and VEM have not verified the figures, market data and other information used by
third parties in their studies, publications and financial information, or the external sources on which
the Company’s estimates are based. The Company and the Underwriters therefore assume no
liability for and offer no guarantee of the accuracy of the data from studies and third-party sources
66
contained in this Prospectus and/or for the accuracy of data on which the Company’s estimates are
based. The Prospectus also contains estimations of market and other data and information derived
from such data that cannot be obtained from publications by market research institutes or from
other independent sources. Such information is partly based on the Company’s own market
observations, the evaluation of industry information (from conferences, sector events, etc.) or
internal assessments. The Company believes that its estimates of market and other data and the
information it has derived from such data assists investors to better understand that companies of
the PRM Group operates in and the Company’s position within it. The Company’s own estimates
have not been checked or verified externally. The Company nevertheless assumes that its own
market observations are reliable. The Company and VEM give no warranty for the accuracy of the
Company’s own estimates and the information derived from them. They may differ from estimates
made by competitors of the PRM Group or from future studies conducted by market research
institutes or other independent sources.
Documents Available for Inspection
For the duration of the validity of this Prospectus, copies of the following documents will be
available for inspection in printed form during regular business hours at the registered office of
Pacific Retail Merchants AG, Rosenheimer Str. 145e, 81671 Munich, Germany as well as on the
Company’s website (www.pacificretailmerchants.com):

the Company’s Articles of Association and the by-laws for the management board and the
supervisory board;

the audited financial statements of Giant Luxury Holdings, Ltd., Hong Kong, for the fiscal
years ended September 30, 2012, September 30, 2011, September 30, 2010;

the audited interim financial statements of Pacific Retail Merchants AG, Munich as of 30
September 2012
Future annual reports and interim reports of the Company will be available on the Company’s
website and, to the extent required by mandatory law, published in the Federal Gazette
(Bundesanzeiger) at www.bundesanzeiger.de.
Notes Regarding Financial and Currency Data
Some figures (including percentages) contained in this Prospectus have been rounded to the
nearest whole number. As a result, figures in tables so rounded may in some cases not add up to
the exact totals shown in the tables. Percentages quoted in the text were, however, calculated on
the basis of actual values rather than the rounded values. Accordingly, percentages quoted in the
text may in some cases differ from percentages based on the rounded values.
All information with respect to currencies in this Prospectus refers to Hong Kong Dollars (“HKD”)
except otherwise stated. As at 30 June 2012 the closing exchange rate was HKD 9.65660 per EUR
1.00. Amounts denominated in other currencies are expressly identified as such with the
corresponding currency designation or currency symbol.
The exchange rates (closing and average rates) used for foreign currency translation in the audited
financial statements, which are enclosed in the financial section of this prospectus, are the
following:
Ex. Rate EUR/HKD
30/6/2012 30/9/2011 30/9/2010 30/9/2009
Closing
9.65660
10.60340
10.56120
11.30180
Average
10.22429
10.86524
10.55539
10.51297
Auditors
The operational business of PRM is exclusively carried out by Giant Luxury Holdings Ltd., Hong
Kong (“Giant Luxury”) and its subsidiaries. Because of this reason the consolidated financial
statements of Giant Luxury are shown in this report. The consolidated financial statements for the
years ended 30 September 2012, 30 September 2011, and 30 September 2010 under IFRS, have
been audited by HKCMCPA Company Ltd., certified public accountants, Hong Kong, China and
they are accompanied by an unqualified auditor’s report.
67
HKCMCPA Company Ltd., appearing elsewhere herein are independent accountants as stated in
their reports and a member of the Hong Kong Institute of Chartered Accountants.
The audited interim financial statements of Pacific Retail Merchants AG, Munich as of 30
September 2012 have been audited by VEDA WP GmbH Wirtschaftsprüfungsgesellschaft, certified
pulbic accountants, Munich and they are accompanied by an unqualified auditor's report. VEDA
WP GmbH Wirtschaftsprüfungsgesellschaft is a member of the German Chamber of Auditors
(WPK).
For further details on the financial information see section ‘‘SELECTED FINANCIAL
INFORMATION and ‘‘MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS’’ in this Prospectus. Financial information in this
Prospectus denoted as unaudited has not been audited or reviewed.
68
THE OFFERING
Subject Matter of the Offering
The Offering consists of a public offering made by the Company itself (Eigenemission) in Germany
and the United Kingdom and private placements to institutional investors outside Germany, the
United Kingdom and the United States.
The Offering consists of 1,000,000 non par value ordinary bearer shares (Inhaber-Stückaktien) of
Pacific Retail Merchants AG created under and in accordance with German law, each ordinary
bearer share having a notional amount of the share capital of EUR 1.00 and each vested with full
dividend rights for the fiscal year beginning on January 1, 2013, consisting of:
 1,000,000 no par value ordinary bearer shares which emanate from a capital increase
against cash contribution pursuant to a resolution adopted by the extraordinary shareholders’
general meeting (Hauptversammlung) of the Company;
No fixed tranches have been reserved for any particular group of investors nor for the intended
private placement.
The nominal value of the 1,000,000 shares that are the subject of this Offering represents a total of
EUR 1,000,000 of the share capital of the Company.
Upon implementation and registration of the capital increase against cash contribution pursuant to
a resolution adopted by the extraordinary shareholders’ general meeting (Hauptversammlung) to
be held on _________, the share capital of the Company will amount up to 7,403,007 shares
issued and outstanding.
In connection with the Offering, approximately 15.6% of the shares of the Company will be offered.
The actual number of Offer Shares is expected to be published on ________ in an announcement
on the Company’s website (www.pacificretailmerchants.com) and as a corporate news.
In connection with the Offering, the Company will receive the net proceeds from the sale of the
New Shares.
The Company itself will coordinate and manage the Offering.
Timetable for the Offering
The scheduled timetable for the Offering is as follows:
28 March 2013
Expected Approval of the Prospectus by the German Federal
Financial
Supervisory
Authority
(Bundesanstalt
für
Finanzdienstleistungsaufsicht, “Bafin”)
Expected Publication of the Prospectus on the Company’s
website (www.pacificretailmerchants.com)
29 March 2013
Commencement of offer period
05 April 2013
End of the offer period at 12am (noon) Central European Time for
private investors and 4pm Central European Time for institutional
investors
Approval of trading inclusion issued by the Frankfurt Stock
Exchange
Publication of the shares placed during the Offer as a corporate
news
and
on
the
Company’s
website
(www.pacificretailmerchants.com)
08 April 2013
Commencement of trading in the Company’s shares
69
The Prospectus will be published and available in electronic form for download on the Company’s
website (www.pacificretailmerchants.com on the date of its approval. In addition, the Prospectus
will be available in printed form as of the same date free of charge during regular business hours
from the Company.
Price Range, Offer Period, Offer Price, and Allotment
The offer price is EUR (2.00) per Offer Share. The offer price was set by the Company based upon
a discount, as an incentive to investors, to its own valuation using typical valuation methods such
as discounting cash flow.
The Offering will be denominated in Euros and the offer period, within which investors will have the
possibility to place purchase orders for the shares, is expected to begin on 29 March 2013 and is
expected to end on 05 April 2013. Interested investors are asked to pay attention to the
announcements published in the media mentioned in the preceding paragraph for further details of
the Offering. During the offer period, offers to purchase shares (“Share Subscriptions”) may be
submitted to the Company by facsimile message to the number: +49 89 809 902 999. On the last
day of the offer period, investors will be able to submit offers to purchase shares until 12:00 a.m.
(noon) (Central European Time) if they are private investors; institutional investors will be able to
submit offers until 4pm (Central European Time). Share Subscriptions are only valid under the
following conditions: (i) the subscription form provided by the Company on its website
(www.pacificretailmerchants.com) is used and completely and accurately filled in and (ii) the
subscription price is paid in full at the latest at the end of the offer period to the Company account
specified on the subscription form (credit of Company account is relevant).
The Company reserves the right to decrease the number of Offer Shares, and/or to extend or
shorten the entire offer period. Should any of the terms of the offer be modified, the change will be
published via an electronic information system and on the Company’s website
(www.pacificretailmerchants.com). This publication will be made to the extent required under the
German Securities Prospectus Act (Wertpapierprospektgesetz) as a supplement (Nachtrag) to the
Prospectus. There will be no individual notification of investors who have submitted purchase
offers. Any changes to the number of Offer Shares or to the price or to any extension or shortening
of the offer period will not nullify any purchase orders that have already been placed. Investors who
have already placed purchase orders prior to the publication of a supplement will have the right to
withdraw these purchase orders within two business days following publication of the supplement
as is provided for in the German Securities Prospectus Act (Wertpapierprospektgesetz). Instead of
withdrawing their purchase orders, investors may also amend the purchase orders submitted prior
to publication of the supplement (Nachtrag) or alternatively place new limited or unlimited purchase
orders within two business days after publication of the supplement (Nachtrag).
Purchase orders are revocable until the end of the offer period.
Once the offer period has expired, the Offer Shares will be allotted to investors based on the orders
that they submitted. It is expected that the number of shares placed during the Offer will be
published on 29 March 2013 on the Company's website (www.pacificretailmerchants.com) and as a
corporate news.
Investors will be able to obtain information from the Company regarding the number of shares
which will be allotted to them at the earliest possible date but no earlier than the banking day which
follows the expiration date of the offer period.
Multiple subscriptions are permissible. There is no minimum and/or maximum amount of
subscription. Book-entry delivery of the allotted shares against payment of the offer price is
expected to occur as of 05 April 2013. The Company reserves the right not to accept purchase
orders in whole or in part, e.g. in case the placement volume proves insufficient to satisfy all the
orders placed.
General Allotment Criteria
No agreements exist between the Company and the Existing Shareholders and as to the allotment
procedure prior to the commencement of the offer period. The Company will comply with the
“Principles for the Allotment of Share Issues to Private Investors” (Grundsätze für die Zuteilung von
70
Aktienemissionen an Privatanleger), which were issued on 07 June 2000 by the Exchange Expert
Commission (Börsensachverständigenkommission) of the German Federal Ministry of Finance
(Bundesministerium der Finanzen). After the offer period has ended, the Company will determine
and publish the details of the allotment method in accordance with the ‘Principles for the Allotment
of Share Issues to Private Investors’.
To the extent known to the Company, no major shareholders or members of the Company's
management, supervisory or administrative bodies intend to subscribe New Shares, nor does any
person intend to subscribe for more than five per cent of the offer.
Delivery and Settlement of the Offer Shares
Book-entry delivery of the allotted shares using a share loan by Existing Shareholders is expected
to occur as of 08 April 2013. The shares will then be made available to shareholders as coownership interests in the global share certificate.
Shares purchased pursuant to this Offering will be credited to a securities deposit account
maintained by a bank at Clearstream Banking AG, Mergenthalerallee 61, 65760 Eschborn,
Germany, for the account of such investor or to the securities deposit account of a participant at
Euroclear Bank S. A./N. V., 1, Boulevard Roi Albert II, 1120 Brussels, Belgium, as operator of the
Euroclear Systems, or Clearstream Banking S. A., L-2967 Luxembourg.
Stabilization Measures
Stabillization measures aim at supporting the stock exchange or market price of the Company's
shares in order to offset any sales pressures that may exist.
If any stabilization measures are taken by the Company, they may be terminated at any time
without prior notice. Such measures may be taken from the date of inclusion of the Company’s
shares in the trading in the Regulated Market of the Frankfurt Stock Exchange, and must be
completed no later than on the 30th calendar day after such date.
Stabilization measures may lead to the stock exchange or market price of the Company's shares
being higher than it would have been in the absence of any such measures. Additionally, such
measures may result in a stock exchange or market price at a level that is not sustainable.
Within one week after the end of the stabilization period, information regarding possible
stabilization
measures
will
be
announced
on
the
Company's
website
(www.pacificretailmerchants.com) and as a corporate news. This information will outline whether a
stabilization measure has been taken or not, the date on which such stabilization measure has
commenced, the date on which the last stabilization transaction has been taken, and the price at
which such stabilization has been effected for each date on which stabilization measures have
been effected. The publication will be effected in the manner and at the time prescribed above.
General and Specific Information on the Shares
Voting Rights
Each share confers one vote at the Shareholders’ General Meeting (Hauptversammlung) of the
Company. There are no limitations to the voting rights. The Existing Shareholders of the Company
do not have different voting rights.
Dividend Entitlement
Each share confers upon the shareholder the right to an equal share in any dividend paid by the
Company. The shares are vested with full dividend rights for the entire financial year 2012.
Form and Certification of Shares
All shares of the Company have been and will be issued as no par value ordinary bearer shares as
prescribed by the Company’s articles of association. The current share capital of the Company in
the amount of EUR 6,403,007.00 is represented by a global share certificate without dividend
coupons, which is deposited with Clearstream Banking AG, Mergenthalerallee 61,
65760
Eschborn, Germany.
71
Pursuant to Sec. 4 para 4 of the Company’s Articles of Association (Satzung), the Company may
issue multiple share certificates that evidence several individual shares (so-called global share
certificates (Globalurkunden). To the extent the global share certificates have been issued in
respect of the shares of the Company, the shareholders have no claim to the issue of the individual
share certificates.
Securities Identification Numbers/Stock Symbol
German Securities Identification Number (WKN):
A1PHEF
International Securities Identification Number
(ISIN):
DE000A1PHEF0
Ticker Symbol:
7PR
Transferability/Lock Up
The Company’s shares are freely transferable. Except for the restrictions set forth under Selling
Restrictions (Lock-Up), there are no prohibitions with respect to the disposal or the transferability of
the shares of the Company.
Selling Restrictions (Lock-Up)
The Existing Shareholders have agreed with VEM Aktienbank AG that, for a period of 6 months
(“Lock Up Period”) after the date of commencement of trading in the Company’s shares, they will
not
 offer, pledge, sell, contract to sell, sell an option to buy, buy an option to sell or otherwise,
directly or indirectly, transfer or dispose of shares of the Company or other securities that are
convertible into or exchangeable for shares of the Company;
 enter into swap transactions or transactions that transfer the economic risk of holding the
shares to a third party, in whole or in part, regardless of whether any such transaction is to
be settled by delivery of shares, payment in cash or other consideration; as well as
 initiate, vote in favor of or in any other way support a capital increase of the Company or
issuance of securities which are exchangeable into shares of the Company or an
economically equivalent transaction.
These restrictions do not apply to transactions relating to shares of the Company that are sold as
part of the Offering, and to shares purchased in the Regulated Market
Admission to Trading
An application for the inclusion of the Offer Shares in the trading in the Regulated Market of the
Frankfurt Stock Exchange (General Standard) is expected to be filed on 01 April 2013. The
inclusion approval is expected to be granted no later than 05 April 2013.
Commencement of trading in the Regulated Market of the Frankfurt Stock Exchange is expected to
take place on 08 April 2013.
REASONS FOR THE OFFERING, USE OF PROCEEDS, COSTS AND INTERESTS OF THIRD
PARTIES INVOLVED IN THE OFFERING
Reasons for the Offering
The reason for the Offering is the intention of the Company’s management to enhance PRM’s
brand name, visibility and recognition and to finance its further expansion.
72
Use of Proceeds and Costs
The Company will receive the net proceeds from the sale of the Offer Shares (“Net Proceeds”),
which equals to the gross proceeds from the sale of the Offer Shares (“Gross Proceeds”) less
expenses paid by the Company in connection with the Offering. As the Company will place the
Offer Shares itself, no selling commissions are expected to be paid. The Net Proceeds depend on
the number of shares offered and placed in the Offering.
The Company estimates that the costs of the Offering will be approximately EUR 500,000.00.
Assuming placement of all offered shares, the Company believes that total Net Proceeds of
approximately EUR 1,500,000.00 are attainable.
The Net Proceeds will be used by the Company mainly for the expansion of PRM Group in Hong
Kong and Macau. Increased capital resources will enable PRM Group to expand its sales and
distribution network and to open additional stores. The Company may also dedicate some of the
received funds to further marketing of its brands.
The following is an overview of the principal intended uses presented by order of priority of such
uses assuming the Net Proceeds from the Offering to be EUR 1,500,000.00:
(i) Retail Store Expansion
EUR 600,000.00 (40 % of the Net Proceeds) will be earmarked for this purpose. The Company will
embark on a 3-year plan to set up its new store concept comprising new stores as well as retail
boutiques in airports and hotels in Hong Kong. In addition, it will open flagship stores to promote
brand awareness and to fuel growth of the newly opened stores. This will include without limitation
leasehold improvements and security deposits for new store locations.
(ii) Marketing Program Including Promotion of Brands
The Company will use EUR 200,000.00 (13% of the Net Proceeds) for the implementation of a
marketing plan to support its sales growth..
(iii) Working Capital
The Company will reserve EUR 200,000.00 (13% of the Net Proceeds) for working capital
purposes to finance its proposed expanded operations.
(iv) Inventory
The Company will use EUR 500,000.00 (34% of the Net Proceeds) for additional inventory
requirements for new stores..
SHAREHOLDER STRUCTURE
The following table provides an overview of the shareholding structure and the participation of the
shareholders in the share capital of the Company prior to the Offering and upon completion of the
Offering assuming the subscriptions for placement of all of the Offer Shares
Shareholder Structure Prior to the Offering
The shareholding in PRM prior to the Offering is the following:
Name of shareholder in Giant Luxury Ltd.
Number of shares
(BVI)
Chung Wing Chin
Sunever Group Limited (indirectly for Wong
Amount of shares in
per cent
1,290,559
20.15
593,505
9.27
Wai Keung)
73
Wong Man Keung
589,086
9.20
Lui Kam Fei
330,848
5.17
Lai Zhi Yan
314,432
4.91
Yuen Ho Pan
310,643
4.89
Alright International Holdings Limited
308,749
4.82
Wong Siu Lai
303,067
4.73
Wong Yim Ling
303,067
4.73
Aggressive Resources Limited
212,147
3.31
Wong Hon Leong
212,147
3.31
Billion Base Investments Ltd.
188,785
2.95
Fortune Asia Investment Ltd.
176,789
2.76
Friedland Global Capital
159,862
2,45
ZXY Strategies Ltd.
154,690
2.42
Orchard Asia Ltd.
154,690
2.42
Elegant Investment Strategies Ltd.
109,230
1.71
Mastermind Asia Ltd.
106,073
1.66
8300 Fasa Ltd.
106,073
1.66
Titanium Investment Asia Ltd.
106,073
1.66
Sharp Win Ltd.
103,548
1.62
Invest Wise Ltd.
64,402
1.01
Lafayette 543 Ltd.
42,303
0.66
Dragon Investment Asia Ltd.
39,146
0.61
Longtou Ltd.
39,118
0.61
JL Penn Investments LLC
25,256
0.40
LHF Holdings LLC
25,256
0.40
74
Hotsun Asia Ltd.
23,361
0.36
Mark Lubchenco
5,051
0.08
W.R. Valentine LLC
5,051
0.08
6,403,007
100.00
Total
Indirect Shareholders of Members of the board of the Company Ms. Yeung Fung Lin indirectly as
owner and board member of Elegant Investment Strategies Ltd. owns 109,230 shares (1.71%) in
the Company. Mr. Wong Wai Keung as the owner and board member of Sunever Group Ltd.,
indirectly owns 593,505 shares, (9.34%) of the Company.
All Shareholders have equal voting rights and to the knowledge of the Company there are now
agreements in place which could lead to a change of control in the Company at a later point in
time.
Shareholder Structure as of the Offering
As of the date of the admission of the shares of the Company for trading on the Frankfurt Stock
Exchange, the Company has a shareholder structure as set forth in the table above.
The Company is not aware of any member of the Company’s Board who, other than as described
in this document, directly or indirectly, has an interest in the Company’s capital or voting rights,
which is notifiable under German law.
Further, the Company has no knowledge of potential subscribers of the Offer Shares.
75
DIVIDEND POLICY AND EARNINGS PER SHARE
General Provisions Relating to Profit Allocation and Dividend Payments
The shareholders’ share of profits is determined based on their respective interest in the
Company’s share capital. In a German stock corporation (Aktiengesellschaft), resolutions regarding
the distribution of dividends for a given fiscal year and the amount and payment date of such
dividends are adopted by the shareholders’ general meeting of the subsequent fiscal year upon a
joint proposal by the management board and the supervisory board.
Dividends may only be distributed from the distributable profit of the Company. Said distributable
profit is calculated based on the Company’s annual unconsolidated financial statements prepared
in accordance with the German accounting principles, i.e. the accounting principles laid out in the
German Commercial Code (Handelsgesetzbuch).
When determining the amount available for distribution, net income for the year must be adjusted
for profit/loss carry-forwards from the prior year and release of or allocations to reserves. Certain
reserves are required to be set up by law and must be deducted when calculating the profit
available for distribution. The management board must prepare the financial statements (balance
sheet, income statement and notes to the financial statements) and the management report for the
previous fiscal year by the statutory deadline, and present these to the auditors and then the
supervisory board after preparation. At the same time, the management board and supervisory
board must present a proposal for the allocation of the Company’s distributable profit pursuant to
Section 170 of the German Stock Corporation Act (Aktiengesetz). Pursuant to Section 171 of the
German Stock Corporation Act, the supervisory board must review the financial statements, the
management board’s management report and the proposal for the allocation of the distributable
profit, and report to the shareholders’ general meeting in writing on the results. The supervisory
board must submit its report to the management board within one month after the documents have
been received. If the supervisory board approves the financial statements after its review, these are
deemed adopted unless the management board and supervisory board resolve to assign adoption
of the financial statements to the shareholders’ general meeting. If the management board and
supervisory board choose to allow the shareholders’ general meeting to adopt the financial
statements, or if the supervisory board does not approve the financial statements, the management
board must convene a shareholders’ general meeting without delay.
The shareholders’ general meeting’s resolution on the allocation of the distributable profit must be
passed with a simple majority of votes cast. If the management board and supervisory board adopt
the financial statements, they can allocate an amount of up to half of the Company’s net income for
the year to other surplus reserves. Additions to the legal reserves and loss carry-forwards must be
deducted in advance when calculating the amount of net income for the year to be allocated to
other surplus reserves. Dividends resolved by the shareholders’ general meeting are paid annually
shortly after the shareholders’ general meeting, as provided in the dividend resolution, in
compliance with the rules of the respective clearing system. Dividend payment claims are subject
to a three-year standard limitation period. If dividend payment claims expire, the Company
becomes the beneficiary of the dividends.
Dividend income is subject to German dividend withholding tax (Kapitalertragsteuer) (see: Taxation
in Germany – Taxation of Shareholders – Taxation of Dividends).
Dividend Policy
Until the Offering is completed and trading in the Company’s shares in the Regulated Market has
commenced, no dividends will be paid to the Existing Shareholders and retained earnings will
remain with the Company. Future dividends will depend on the Company's earnings and financial
position, the results of operation, the capital needs, the plans for expansion, the profit after tax
financial position, the expected financial performance, the projected capital expenditures and other
investment plans, any restriction on dividend payments under the Company's financing
arrangements as well as other factors. The Company intends to distribute profits only if and to the
extent covered by the annual net income (Jahresüberschuss) which is shown in the respective
Company's annual financial statement and to the extent that profits are not needed to fund the
Company’s further growth. The remaining profit, if any, shall be booked into retained earnings and
shall be used to finance the further development of the Company's business and its internal growth.
In order to report net profits available for distribution, PRM AG as a holding company depends on
76
profit distributions from its subsidiaries (see Risk Factors – Risks Related to PRM’s Business – The
Company is a holding company, the liquidity of which depends upon having access to the liquid
funds of its operating subsidiary located in the PRC, which might not be able to remit profits). The
costs of this offering will have a one-time impact that will adversely affect the Company’s results of
operations in the financial year 2012. The Company was founded on 8 February 2012 as a shelfcompany (Vorratsgesellschaft) and incorporated upon registration in the commercial register
(Handelsregister) with the local court (Amtsgericht) of Munich on 24 April 2012. It became the
ultimate holding company of PRM only on 06 December 2012. On the basis of the audited financial
statements under IFRS of Giant Luxury Holdings Limited (the intermediate parent company of the
Hong Kong subsidiaries) of the financial years 2010 and 2011 and 2012, the following summary
shows the consolidated earnings of the HK subsidiaries (rounded to two decimal points), the
earnings per share, each in accordance with IFRS and the distributed dividends as at and for the
years ended 30 September 2010, 30 September 2011 and 30 September 2012.
Earnings per Share:
Financial Year
2010
Profit for the year (in EUR thousand)** ...............
62
2011
400
2012
1,129
6,403,007
6,403,007
Earnings per share in EUR (undiluted) ............. 0,0097
0,0625
0,165
Earnings per share in EUR (diluted) ................... 0,0097
Dividends per share in EUR ................................ 0.00
0,0625
0.00
0,165
0.00
Number of shares*
6,403,007
* For better comparability, the current number of shares of the Company is the number of shares
subsequent to the increase of the share capital by way of contribution in kind
** Profit attributable to controlling party and equity holders of the Company
77
CAPITALISATION AND INDEBTEDNESS
The data presented in the following table shows the capitalization of PRM Group as at 31st
January 2013 on a consolidated basis. The data has been prepared in accordance with IFRS. As a
result of the net proceeds obtained in the Offering, the capitalization of the Company will change
following the Offering.
Capitalisation of PRM Group
as at
31 January 20131 (in EUR)
(unaudited)
Total Current debt
- Guaranteed
6,079,106
-
- Secured4
1,079,409
- Unguaranteed/Unsecured
4,999,697
Total Non-Current debt (excluding current portion of long-term
debt)
1,065,407
- Guaranteed
-
-
Secured4
1,065,407
- Unguaranteed/Unsecured
Shareholder`s equity:
622,796
a. Share capital2
622,796
b. Legal Reserve
-
c. Other Reserve
-
Total:
Indebtedness of PRM Group
7,767,309
as at
31 January 20131 (in EUR)
(unaudited)
A. Cash
221,671
B. Cash equivalent
-
C. Trading securities
D. Liquidity (A) + (B) + (C)
E. Current Financial Receivables3
221,671
3,798,730
F. Current Bank debt
790,383
G. Current portion of non current debt
289,025
H. Other current financial debt
4,999,697
I. Current Financial Debt (F) + (G) + (H)
6,079,106
J. Net Current Financial Indebtedness (I) - (E)- (D)
2,058,705
78
K. Non current Bank loans
L. Bonds Issued
1,065,407
-
M. Other non current loans
N. Non current Financial Indebtedness (K) + (L) + (M)
1,065,407
O. Net Financial Indebtedness (J) + (N)
3,124,112
1)
Taken from the internal management accounts of the companies.
2)
share capital represents issued capital of Pacific Retail Merchants AG and Giant Luxury Holdings Limited.
3)
Current financial receivables are financial assets as defined in IAS 31.11 which are expected to be recovered or settled no
more than twelfe months after the date of 30 November 2012 (except for cash and cash equivalents disclosed under
Liquidity)
4)
Secured on leasehold improvements and furniture fixture equipments of Giant Luxury Holdings Ltd., Hong Kong
As at 31 January 2013 there are no contingent liabilities or indirect liabilities of PRM Group.
The existing working capital of PRM Group is sufficient to cover at least those payment obligations,
which will become due within the next twelve months.
79
SELECTED FINANCIAL INFORMATION
The Company was founded on 8 February 2012 as a shelf-company and registered in the
commercial register of the local court of Munich (Amtsgericht München) on 24 April 2012.
The operational business of PRM is exclusively carried out by Giant Luxury Holdings Ltd., Hong
Kong and its subsidiaries, The sole shareholder of Giant Luxury Holdings Ltd is the Company
which is acting as a financial holding.
Giant Luxury Holdings Ltd carries out its business through its wholly owned subsidiaries Hing Lung
Medicine Company Limited, Universal Medicine Company Limited, Dah Sing Bird Nest Store
Limited, Yue York Medicine Group Limited, Giant King Medicine Limited, Giant Royal Medicine
Limited, Giant Top Medicine Limited, Giant Ocean Medicine Limited, Giant Channel Medicine
Limited, Giant Emperor Medicine Limited, Giant Dragon (China) Limited, GL IIXII Limited
(“Operating Subsidiaries”).
In order to present the business, financial condition and results of operations of PRM historically, in
the following, the financial data is used from Giant Luxury. The audited annual consolidated
financial statements of Giant Luxury as at and for the years ending 30 September 2012, 30
September 2011 and 30 September 2010 have been established under IFRS. These financial
statements have been prepared by Giant Luxury for the purpose of this Offering. The purpose of
this form of financial statements is to put the investor in the position to better compare the
development of the business, financial condition and the results of operations of Giant Luxury and
PRM over the periods of the past three years.
The above mentioned audited financial statements were audited by HKCMCPA Company Ltd.,
certified public accountants, Hong Kong.
The interim financial statements as of 30 September 2012 of Pacific Retail Merchants AG were
audited by VEDA WP GmbH Wirtschaftsprüfungsgesellschaft, München
The following selected financial information which is reflected in this section, has been extracted
from the audited financial statements of Giant Luxury Holdings, Ltd., unless expressly stated
otherwise.
The following figures were subject to rounding adjustments that were carried out according to
established commercial standards. As a result, the figures stated in the table may not exactly add
up to the total values that may also be stated in the table.
80
Giant Luxury Holdings Ltd.:
1 October - 30 September
2010
Selected Income
Statement Data
Revenues
Cost of sales
Gross profit
Other income
Selling and distribution
expenses
Administrative and other
expenses
Finance Costs
Profit before taxation
Income tax expense
Net profit
Selected Cash Flow Data
Profit before taxation
Net cash generated from
operating activities
Net cash used in investing
activities
Net cash used in financing
activities
Net increase in cash and
bank balances
Cash and bank balances
at end of financial year
2011
(in EUR thousand)
(audited)
2012
2,834
(1,527)
1,307
0
6,856
(4,172)
2,684
0
10,889
(5,763)
5,126
19
(1,073)
(1,728)
(2,488)
(153)
(2)
79
(17)
62
(438)
(3)
515
(115)
400
(1,333)
(47)
1,277
(221)
1,055
79
515
1,277
111
147
(2,075)
(78)
(137)
(135)
26
25
2,483
59
35
262
175
210
488
81
30 September
2010
2011
2012
(in EUR thousand)
(audited)
Selected Balance Sheet
Data
Non-current assets
105
188
881
Current assets
1,517
3,215
7,740
Total assets
1,622
3,403
8,621
Current liabilities
1,505
2,888
5,293
Total liabilities
1,524
2,896
6,482
Capital and reserves
Total equity and
liabilities
98
507
2,139
1,622
3,403
8,621
81
518
1,324
Other selected Financial
Data
EBIT2
30 September
Other selected Financial
Data
EBIT margin3 in %
Net profit margin4 in %
Number of employees5
2010
2011
(unaudited)1
2012
2,84
2,19
17
7,56
5,83
39
12,16
9,69
78
1)
"Other Selected Financial Data" is unaudited and has been calculated based on information
derived from the audited Historical Consolidated Financial Statements of Giant Luxury
Holdings Ltd. and is taken from the internal management accounts of Giant Luxury Holdings
Ltd..
2)
Profit before taxation plus interest expense
3)
EBIT divided by revenues multiplied by 100
4)
Net profit for the period divided by revenues multiplied by 100
5)
Average numbers of the financial period. Audited information for the period 2010-2012.
82
Pacific Retail Merchants AG:
The following figures show the first interim financial year of Pacific Retail Merchants AG from 24
April 2012 - 30 September 2012. There are no existing comparative figures of previous years.
(in EUR thousand)
(audited)
Selected Income
Statement Data
Administrative expenses
deferred taxes
loss of the period
24.4.2012-30.09.2012
(7)
2
(5)
Selected Cash Flow Data
loss of the period
(5)
Operating profit before
working capital changes
(5)
Net Cash generated from
operating activities
2
Net cash used in investing
actvities
38
Net cash used in financing
activities
0
Net increase in cash and
bank balances
35
Cash and bank balances
48
83
(in EUR thousand)
(audited)
30.09.2012
24.04.2012
Non-current assets
173
0
Current assets
50
13
Selected Balance Sheet
Data
Total assets
223
13
Current liabilities
178
0
Total liabilities
178
0
Capital and reserves
45
13
Total equity and
liabilities
223
13
As of 30 September 2012 the company has no employees. As the company had no revenues in the
financial period from 24 April 2012 - 30 September 2012.
"Other financial data" is not available.
84
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following management’s discussion and analysis of the business, financial condition and
results of operations of PRM AG and Giant Luxury should be read in conjunction with the other
information in this Prospectus, including the financial information and related notes thereto
beginning on page F-1 and the section “Selected Financial Information”.
Pacific Retail Merchants AG:
The operational business of PRM is exclusively carried out by Giant Luxury and its subsidiaries,
The sole shareholder of Giant Luxury is the Company which is acting as a financial holding. To
give an overview of the financial situation of PRM, interim financial statements of Pacific Retail
Merchants AG for the period from 24 April 2012 to 30 September 2012 have been prepared. In the
following the relevant positions of the interim financial statements are being described.
Other operating expenses
Other operating expenses
Sum
EUR
EUR
24.04. – 30.09.2012
(7,062.75)
(7,062.75)
Income tax
Deferred taxes on losses carried
forward
Deferred taxes on advance
payments
Sum
24.04. – 30.09.2012
53,731.15
EUR
(51,624.69)
EUR
2,1
06.
46
Current assets
Cash and cash equivalents
Total
EUR
EUR
24.04. –
30.09.2012
47,937.25
47,937.25
Cash and cash equivalents
The balance as of 30 September 2012 reflects the company’s credit on its
bank accounts.
Advance payments
The advance payments as of 30 September 2012 reflects capitalized costs of
shareholder equity procurement.
85
Provisions
Provisions
retention
for
accounting/-
24.04. – 30.09.2012
5,000.00
EUR
Total
EUR
5,000.00
The capitalized advance payments refer to costs of shareholders equity
procurement that is not finished as at 30 September 2012.
Current and deferred Income tax
Deferred tax
Relating to origination and reversal of temporary differences the deffered tax
relates to the following positions of the statements of financial postion (“+
deferred tax assets”/ “- deferred tax liabilities”):
September 30, 2012
Advance payments
Accumulated losses
Deferred tax assets
- 51,624.69
+ 53,731.15
+ 2,106.46
Deferred tax assets occur on advance payments in the amount of EUR 51,624.69. Deferred tax
liabilities occur on accumulated losses in the amount of EUR 53,731.15 which, according to the
budget of the company, can be utilized in the future. The tax rate which was used for the
calculation of the deferred tax liabilities on accumulated losses was the tax rate of the company,
which is currently 29,825 %.
Tax reconciliation:
Profit and Loss before taxes
Tax rate
Expected tax revenue
Changes:
Deferred taxes advance payments / losses
carried forward
Tax revenue
Effective tax rate
Sep 30, 2012
(7,062.75)
29,825%
0.00
2,106.46
2,106.46
29,825%
Share capital
The Company was founded by means of a notarial deed of formation dated 08 February 2012. The
completion of the formation became legally effective by registration in the commercial register of
the local court of Munich on 24 April 2012.
Subscribed Capital
86
The Company formed with a subscribed capital of EUR 50,000,00 and is divided into 50,000,00
bearer shares with nominal value of 1.00 EUR each. The subscribed share capital was provided in
cash.
Authorized Capital
At date as of 30 September 2012 there is no existing authorized capital of the company.
Liabilities
Trade payables
Provisions
EUR
EUR
Sum
EUR
24.04. – 30.09.2012
173,092.00
5,000.00
178,092.00
Financial risk management
Financial assets
Financial liabilities
EUR
EUR
–
24.04.
30.09.2012
221,029.25
173,092.00
The maturity of the financial assets and liabilities are all within one year.
Giant Luxury Holdings Limited:
Overview
Upon completion of the acquisition on 06 December 2012, PRM Group comprises of a total of 14
companies, i.e. Pacific Retail Merchants AG, the ultimate holding company based in Munich,
Germany, the intermediate holding company, Giant Luxury Holdings Ltd Hong Kong, (“Giant
Luxury”) based in Hong Kong, and twelve operating subsidiary companies, (collectively, the
“Stores”).
The Company was founded on 08 February 2012 as a so-called shelf-company
(Vorratsgesellschaft) and registered in the commercial register (Handelsregister) with the local
court (Amtsgericht) of Munich on 24 April 2012 under HRB198381.
Initially established in 1999 in Hong Kong, the Company operated as a single location until 2008
when a second unit was opened and a third store was brought onboard in 2009. Since then PRM
accelerated the expansion adding two stores in 2010 and five in 2011. Today the Company
operates 9 retail stores and one wholesale operation and has 59 full time employees.
Giant Luxury was established by GNL11 Limited (“GNL 11”) on July 13, 2011. GNL 11 transferred
all its shares to the member of the board of the Company, Mr. Chung Wing Chin on September 30,
2011. Giant Luxury (UK) PLC acquired all the outstanding shares from Mr. Chung Wing Chin on
September 30, 2011 and became the 100% shareholder of Giant Luxury. On October 11, 2011, the
authorized capital of Giant Luxury was increased from 10,000 shares to 5,300,000 shares, whereas
on the same date 5,299,999 shares were allotted to Giant Luxury (UK) PLC. On April 23, 2012, the
authorized capital of Giant Luxury was further increased from 5,300,000 shares to 6,000,000
shares. On May 4, 2012, Giant Luxury (UK) PLC transferred all its 5,300,000 shares to Giant
Luxury Limited, a BVI company. On 06 December, 2012, Giant Luxury Limited transferred all its
5,300,000 shares to the Company, which then became the 100% shareholder of Giant Luxury.
In order to present the business, financial condition and results of operations of PRM Group, the
Company has prepared separate financial statements of the key operating subsidiary Giant Luxury
for the financial years ended 30 September 2010, 30 September 2011 and 30 September 2012
(“Consolidated Financial Statements”) in accordance with IFRS, as endorsed for application in
87
the EU. The Consolidated Financial Statements were audited by HKCMCPA Company Limited
(“HKCMCPA”). They are not the legally required financial statements of the Company but have
been prepared on a voluntary basis for the purpose of this Offering. The purpose of these financial
statements is to enable investors to better compare the development of the business, financial
condition and the results of the Company over the periods under review.
Moreover interim financial statements of PRM AG have been prepared as of 30 September 2012.
This discussion and analysis contains some forward-looking statements that are subject to known
and unknown risks and uncertainties. The actual results and the timing of events could differ
materially from those expressed or implied by such forward-looking statements as a result of
various factors, including those discussed below and elsewhere in this Prospectus, particularly
under the heading “Risks Factors”.
The following figures were commercially rounded. It is therefore possible that the addition of such
rounded amounts will not yield the same values as the sum of the full amounts.
Financial Overview PRM’s sales revenue increased 142 from approximately TEUR 2,834 for fiscal
year 2010 to approximately TEUR 6,856 for the fiscal year 2011, and TEUR 10,889 in fiscal 2012,
representing an increase of 59% over fiscal year 2011.
PRM Group’s net profits increased 545% from approximately TEUR 62 for fiscal 2010 to
approximately TEUR 400 in fiscal year 2011. In fiscal 2012, the Company reported net income of
TEUR 1,055, representing a growth rate of approximately 164% as compared to fiscal year 2011.
PRM Group’s sales are largely generated through its retail stores, however there has been a
growing wholesale component. This trend arose from management’s ability to secure scarce
products at attractive prices. As the Company’s retail network grew, PRM was able to leverage its
cumulative purchasing power to procure a greater variety of products and broaden its inventory.
Soon other small storeowners were soliciting the Company to provide products that they would not
otherwise have access to.
Business Overview
PRM sells a variety of dried seafood and other traditional Chinese delicacies, medicines and health
supplements through its network of Company owned stores operating under the name Shang Yu
Tang. The Company also sells a variety of personal care products, over-the-counter (OTC)
medicines and health supplements for both retail and wholesale customers.
Dried delicacies such as abalone, fish maw, edible bird’s nest, sea cucumber and cordyceps
among others are considered prestigious in traditional Chinese culture. They are commonly served
at celebrations and ceremonies of honor and are especially prominent during important occasions
like weddings, birthdays, business functions and Chinese national festivals. Valued for their
delicate taste, nutrient value and contribution to good health and longevity, high quality dried
delicacies such as those sold by PRM Group often sell for hundreds of dollars per ounce.
Hong Kong provides the Company with an ideal environment to participate in the dried delicacies
market. Logistically, Hong Kong’s position as an import/export gateway to the east provides the
Company with broad access to purveyors of dried seafood from around the world.
PRM revenues are primarily generated by Chinese customers or those providing gifts for Chinese
people. Of Hong Kong’s seven million inhabitants3, it is estimated that 95% are Chinese 4. Hong
Kong is also a popular tourist destination, welcoming approximately 36 million visitors per year 5, the
3
http://www.censtatd.gov.hk/hkstat/sub/so20.jsp, Census and Statistics Department Population Overview;
4
The Government of Hong Kong, Introduction http://www.gov.hk/en/about/abouthk/facts.htm,
5
HKTB VISITOR ARRIVALS http://202.85.167.201/pnweb/jsp/doc/listDoc.jsp?doc_id=139521,
88
vast majority of whom are Chinese6.
The Company’s registered office is located at Rosenheimer Str. 145e, 81671 Munich, Germany.
Key Factors Affecting Results of Operations
PRM believes that the following factors had and will continue to have a material effect on its results
of operations and financial condition.
Leadership Position in Historical Market
Hong Kong’s dried seafood market has been active since the late 18th century. The vast majority of
shops in Hong Kong are small with limited inventory and there are only two large, multi-unit
operators, both of which have a narrower focus than that of the Company.
Access to Inventory
PRM’s management team’s market experience and product expertise provides the Company with a
true competitive advantage, enabling it to benefit on a retail and wholesale basis.
Growth of tourism in Hong Kong from the PRC
In July 2003, six years after sovereignty over Hong Kong reverted to China; the Chinese
Government implemented the Individual Visitor Scheme (“IVS”) policy, permitting the residents of
specified cities within Mainland China to travel to Hong Kong as free individuals. As a result of IVS,
Hong Kong has enjoyed tremendous increases in the number of tourists from the People’s
Republic of China Mainland. According to the Hong Kong Tourism Board (HKTB) overall visitor
arrivals to Hong Kong in 2010 totaled just over 36 million, a 21.8% increase over the previous year.
These numbers included approximately 22.5 million Mainland Chinese arrivals, 8.2 million shorthaul (less than a 3 hour flight, excluding Mainland) arrivals, and 4.8 million long-haul (greater than
a 3 hour flight) arrivals. In July 2011 more than 3.8 million visitors arrived in Hong Kong, equivalent
to more than half of Hong Kong's population, which set an outright record for a single month. 7
Key Cost Factors
Material Costs
For the financial years 2010, 2011 and 2012, the material component in the cost of sales
accounted for TEUR 1,515, TEUR 4,148, and TEUR 5,704, respectively, and constituted 53.4%,
60.5%, and 52%, respectively, of PRM revenues. The percentages increased in 2011, as a result
of the increased pricing of specialty dried seafood. In fiscal 2012, the cost of goods returned to the
earlier margins of 50%.
In the event of a significant increase in material prices, PRM is able to pass the increased cost on
to customers; conversely, if material costs decrease the Company would not necessarily lower the
price of its products accordingly, thus its results of operations will be positively affected.
Labor Costs
The labor associated with PRM’s sales is relatively minimal, as compared to the cost of products,
amounting to less than TEUR 1 for each period from 2010. Management expects this trend will
continue for the foreseeable future.
PRM’s work force is currently all located in Hong Kong. Average annual salaries in Hong Kong
increased somewhat throughout the audited periods; however the Company’s staff is comprised by
6
The Government of Hong Kong Census and Statistics Department Population Overview,
http://www.censtatd.gov.hk/hkstat/sub/so20.jsp
7 see Footn. 5) and 6)
89
relatively low skill employees, who are paid a basic salary plus commission. According to the
Census and Statistics Department, the average wage rate for all selected industry section
increased by 8% in nominal terms in 2012. To the extent that PRM will be subject to an increase in
labor costs without an increase in revenues, this will adversely affect its business and results of
operations.
Inventories
Inventories of Pacific Retail Merchants increased TEUR 1,170 from TEUR 1,098 as at 30
September 2010, to TEUR 2,269 at fiscal 2011, and then up another TEUR 1,461 to TEUR 3,731
during fiscal 2012.
The Company’s ability to manage its inventory is critical to PRM’s success. As the Company builds
its retail and wholesale operations, Management’s purchasing power will increase giving it further
advantage with suppliers.
Price Level for the Products
PRM has adopted a standardized retail pricing structure system to ensure designated consistent
pricing throughout its network. The Company is more flexible in its wholesale pricing, however it
does enact policies to ensure that competitor pricing does do not hinder PRM’s shops.
Effects of Currency Fluctuations
The Company’s sales are currently transacted solely in Hong Kong dollars; the consolidated
financial statements were prepared in HKD and converted to EUR for presentation, thus
fluctuations in the HKD and EUR should not have significant impact on PRM’s financial results.
Corporate income tax
The corporate income tax rate in Hong Kong amounts to 16.5% and is expected to remain constant
for the foreseeable future. However, as a result of PRM’s corporate structure, the Company paid a
cumulative tax rate of 34% in fiscal 2010 and 2011. In fiscal 2012, management implemented a
change in the organizational structure that is expected to reduce the Company’s tax rate to the
market range by the end of fiscal 2013. For fiscal 2012, PRM’s tax expense was 18%.
Results of Operations
In order to present the business, financial condition and results of operations for the last three
years in relation to the business of PRM, the following tables present the consolidated income
statement, consolidated statement of financial position and consolidated statement of cash flow of
Giant Luxury and certain segment information as at and for the years ended 30 September 2010,
2011 and 2012.
90
GIANT LUXURY HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the financial years ended 30 September 2012, 2011 and 2010
01.10.2011
to
30.09.2012
EUR
01.10.2010
to
30.09.2011
EUR
01.10.2009
To
30.09.2010
EUR
Revenue
10,889,459
6,856,168
2,834,277
Cost of sales
(5,763,413)
(4,172,300)
(1,527,179)
Gross profit
5,126,046
2,683,868
1,307,098
18,629
(2,488,344)
(1,332,448)
(47,233)
208
(1,728,014)
(437,564)
(3,511)
9
(1,072,665)
(153,817)
(1,618)
Other income
Selling and distribution costs
Administrative and other expenses
Finance costs
Profit before tax
Income tax
Net profit for the financial year
Other comprehensive income:
Exchange differences arising on translation of
foreign operations
Total comprehensive income for the financial
year
Earnings per share:
Basic
Diluted
1,276,650
514,987
79,007
(114,829)
(16,840)
1,055,247
400,158
62,167
73,275
9,496
2,287
1,128,522
409,654
64,454
0.20
0.20
400,158
400,158
62,167
62,167
(221,403)
The tables also present results of operations as a percentage of revenues for the financial years
under audit
Revenues
Revenues increased from TEUR 2,834 in the financial year 2010, to TEUR 6,856, up TEUR 4,022
or 142% in fiscal 2011. Revenues for 2012 were TEUR 10,889, an increase of 59% compared to
the fiscal year 2011. The increase in revenue during the fiscal years 2010 and 2011, is primarily
attributed to the addition of new stores to the network and an increase in sales in existing stores.
Revenue increases in 2012 largely reflects the increase in wholesale sales.
Revenue Breakdown by Product Type
The following table provides a breakdown of total revenues categorized by retail and wholesale for
each of the fiscal years ended 30 September 2010, 30 September 2011, and 30 September 2012.
The second table presents revenues in categories as a percent of total sales and the gross profit
within each category as at 30 September 2012.
91
Breakdown of revenues
01.10.2011
to
30.09.2012
01.10.20.10
to
30.09.2011
01.10.2009
to
30.09.2010
Revenue from:
− Wholesale business
4.343.385
1,357,021
471.240
− Retail buisness
6,546,074
5,499,147
2,363,037
10,889,459
6,856,168
2,834,277
Category
Percent of Total
Category
Sales
Gross
Profit1
Wholesale
39%
Dried Seafood
34%
Chinese Herbal Medicine
Chinese Supplements
Daily Personal Care Products
1this
7%
13%
7%
20%
46%
49%
50%
14%
column presents the gross profit within each category and must not be added up
92
Cost of Sales
Cost of sales comprises inventory, freight charges and direct labor. The following table shows a
breakdown of cost of sales for the years under audit for each category. The table also presents
cost of sales as a percentage of total cost of sales for the years under audit.
Cost of Sales For the years ended September 30
(Euros)
Cost of Inventories sold
Freight charges
Direct labor
Total
Percent of total sales
2012
2011
2010
5,703.666
4,148,648
1,515,612
56,979
22,748
6,465
2,768
904
5,102
5,763,413
4,172,300
1,527,179
53%
60%
53%
The increase in cost of goods as a percent of sales from 2010 to 2011 reflects the building of
inventory. The decline in Cost of Goods as a percent of sales during fiscal 2012 is largely attributed
to the advantageous timing of products purchased from Japan. PRM had purchased a significant
amount of dried seafood in 2010, prior to the Tsunami in March 2011, after which retail pricing went
up significantly, benefiting the Company.
Gross Profit Margin
The overall gross profit margin decreased from 46% in the fiscal year 2010, to 39% in the fiscal
year 2011, reflecting an increase in the cost of sales, most notably those related to inventory.
Gross Profit margins rose again to 47% for in 2012. Management anticipates the gross profit
margin will remain at this level reflecting the Company’s ability to benefit from economies of scales
and cumulative purchasing power as its business grows.
Other Income
Other income comprises principally interest income, insurance compensation, and supplier rebates
income. Other income amounted to TEUR 0 and TEUR 0.2 for fiscal years 2010 and 2011,
respectively, increasing to TEUR 18, or 0.18% of revenue during fiscal 2012.
Selling and Distribution Expenses and Administrative Expenses
Selling and distribution expenses and administrative expenses mainly comprise advertising,
building management fees, depreciation, utilities, insurance, rents and salaries.
Selling and distribution expenses and administrative expenses increased from TEUR 1,073 in fiscal
2010, by TEUR 655 (61%) to TEUR 1,728 in the financial year 2011 and by TEUR 760 (44 %) to
TEUR 2,488 in financial year 2012. These increases are primarily attributed to an increase in
marketing and advertising expenses associated with the addition to the Giant Luxury network. The
growth in selling and distribution expenses slowed during fiscal year 2012, reflecting a stabilizing of
the marketing campaigns.
Income Tax Expense
Income tax expense increased from TEUR 16 in fiscal 2010 to TEUR 115 in fiscal 2011 and TEUR
221 in fiscal 2012. PRM paid a cumulative rate of 21% and 22%, respectively, for fiscal 2010 and
2011; however this rate decreased to 16% for fiscal 2012. This decline reflects a change in the
Company’s corporate structure, which resulted in PRM paying an unnecessarily high rate in the
prior years. Going forward, PRM’s tax rate should stabilize in the 14% to 17% range, which is
typical for Hong Kong.
93
Balance Sheet Data
The following table presents the balance sheet data of PRM as at 30 September 2009, 2010, and
2011, which was derived from the audited Consolidated Financial Statements, as well as the
balance sheet data of PRM as at 30 June 2012, which was derived from the audited Consolidated
Financial Statements.
GIANT LUXURY HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As of 30 September 2012, 30 September 2011 and 30 September 2010
30.09.2012
EUR
30.09.2011
EUR
30.09.2010
EUR
ASSETS
Non-current assets
Plant and equipment
Loan to a director
319,994
561,047
188,060
-
104,880
-
Total non-current assets
881,041
188,060
104,880
Current assets
Inventories
Trade and other receivables
Amount due from ultimate holding company
Loan to a director
Cash and cash equivalents
3,730,604
3,202,463
292,750
22,354
491,654
2,269,070
724,688
220,990
1,098,251
234,351
184,123
Total current assets
7,739,825
3,214,748
1,516,725
TOTAL ASSETS
8,620,866
3,402,808
1,621,605
EQUITY AND LIABILITIES
Equity
Share capital
Reserves
502,890
1,635,720
1
507,198
1
97,544
TOTAL EQUITY
2,138,610
507,199
97,545
LIABILITIES
Non-current liabilities
Bank borrowings
Obligation under finance lease
1,149,859
38,957
8,003
6,943
12,216
Total non-current liabilities
1,188,816
8,003
19,159
Current liabilities
Bank overdrafts
Trade and other payables
Amounts due to related parties
Income tax payable
Bank borrowings
Obligation under finance lease
3,318
2,337,159
1,622,893
358,331
958,665
13,074
10,837
1,965,506
763,310
136,874
6,915
4,164
9,500
881,800
581,382
19,286
9,232
3,701
Total current liabilities
5,293,440
2,887,606
1,504,901
Total liabilities
6,482,256
2,895,609
1,524,060
Total liabilities and equity
8,620,866
3,402,808
1,621,605
94
Non-Current Assets
Property, Plant and Equipment
The Company leases the property for each of its locations, thus property plant and equipment
comprise mainly leasehold improvements, furniture and fixtures, office equipment and motor
vehicles. Property, plant and equipment increased from TEUR 105 as at 30 September 2010, to
TEUR 188 as at September 30 2011, and TEUR 320 at September 2012. The increase resulted
primarily from the launch of new retail locations and the establishment of a warehouse in fiscal
2012.
Current Assets
Current assets mainly comprise inventories, prepayments, trade and other receivables and cash
and bank balances.
Inventories
Inventories increased from TEUR 1,098 as at 30 September 2010, by TEUR 1171, or 107% as at
30 September 2010 to TEUR 2,269, and another TEUR 1,461 or 64% to TEUR 3,731 as at 30
September 2012. These increases largely reflect the Company’s growing product needs as it
supplies a larger retail network and warehouse.
Trade and Other Receivables
Trade and other receivables increased from TEUR 234 as at 30 September 2010 to TEUR 490
(209%) in fiscal 2011, to TEUR 724 as at 30 September 2011, and again to TEUR 3,202, an
increase of TEUR 2,478 or 342% at September 30, 2012, reflecting overall higher sales during this
period. The growth in receivables is in accord with the increase in revenue, and in particular a
growing proportion of sales to wholesale customers.
Cash and Cash Equivalents
Cash and bank balances comprise cash at bank and cash on hand. Cash and cash equivalents
amounted to TEUR 184 and TEUR 220, as at 30 September 2010, 2011, respectively and TEUR
491 in 2012. Cash is managed in order to insure appropriate balances while optimizing the
Company’s ability to develop inventory at advantageous rates.
Equity
Equity comprises share capital, exchange difference, and retained earnings. Equity increased
consistently over the audited period from TEUR 97 as at 30 September 2010; increasing TEUR
410 (422%) to TEUR 507 as at 30 September 2011, by TEUR 1,631 (322%) to TEUR 2,139 as at
30 September 2012. These increases are explained by strong after profits coupled with the fact
that there is no dividend distribution policy.
Current Liabilities
Current liabilities comprise trade and other payables, amount due to related parties, bank
borrowings and current income tax payable.
Trade and Other Payables
Trade and other payables comprise mainly trade payables, salary payables and other payables.
Trade payables increased from TEUR 881 as at 30 September 2010 by TEUR 1,084 (123%) to
TEUR 1,965 at 30 September 2011. At September 30, 2012, trade payables had increased by
TEUR 371 (116%) to TEUR 2,337. These increases primarily reflect the growth in inventory and
staff in servicing the Stores and warehouse
95
Amount Due to Related Parties
Amounts due to related parties comprise compensation of key management, sale of goods, and
amounts due to a director. Amounts due to related parties increased from TEUR 581 in 2010, to
TEUR 763 at September 30, 2011, and again to TEUR 1,623 at September 20, 2012. This increase
primarily reflects advances from the member of the board of the Company, Mr. Chung Wing Chin, a
member of the board of the Company. These advances are interest-free, unsecured and has no
fixed term of repayment.
Liquidity
The following table presents cash flow data of PRM for the years ended 30 September 2010, 2011
and 2012. The analysis of the statement of cash flows is as follows:
96
GIANT LUXURY HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the financial years ended 30 September 2012, 2011 and 2010
2012
EUR
Cash flows from operating activities
Profit before tax
Adjustments for:
Finance cost paid
Interest income recognised in profit or loss
Gain on disposal of plant and equipment
Depreciation of plant and equipment
1,276,650
47,233
(8,844)
(5,426)
76,144
1,385,757
Changes in operating assets and liabilities:
Increase in inventories
(Increase)/decrease in trade and other
receivables
Increase in trade and other payables
Cash (used in)/generated from operation
Hong Kong Profits Tax paid
Net cash (used in)/generated from operating
activities
(1,302,587)
(2,402,934)
2011
EUR
2010
EUR
514,987
79,007
3,511
(10)
55,765
574,253
1,618
(9)
35,401
116,017
(1,146,869)
(340,943)
(671,234)
38,979
1,061,014
627,331
(2,075,086)
147,455
111,093
(11,129)
-
-
(2,086,215)
147,455
111,093
244,678
Cash flows from investing activities
Interest received
Purchase of plant and equipment
8,844
(143,542)
10
(137,348)
9
(77,730)
Net cash used in investing activities
(134,698)
(137,338)
(77,721)
Cash flows from financing activities
Interest paid
Repayment to bank borrowings
Proceed from bank borrowings
Loan to a director
Advances from ultimate holding company, net
Advances from related parties
Repayment of finance lease
(47,233)
(83,622)
2,159,639
(576,416)
235,769
801,707
(7,180)
(3,511)
(8,974)
41,314
(3,597)
(1,618)
16,184
12,232
(1,127)
Net cash generated from financing activities
2,482,664
25,232
25,671
Net increase in cash and cash equivalents
261,751
35,349
59,043
Cash and cash equivalents at beginning of
the year
210,153
174,623
108,037
16,432
181
7,543
Cash and cash equivalents at end of the year
488,336
210,153
174,623
Analysis of the balance of cash and cash equivalents:
Cash and bank balances
Bank overdrafts
491,654
(3,318)
220,990
(10,837)
184,123
(9,500)
488,336
210,153
174,623
Effect of foreign exchange rate changes
97
Net Cash Flow Generated from Operating Activities
Net cash flow generated from operating activities increased from TEUR 111 in fiscal year 2010, to
TEUR 147 (32%) for fiscal year 2011. These increases are mainly attributable to an increased
profit before tax, partially offset by an increase in cash resources used to finance working capital.
The Company had a negative cash flow from operations of TEUR 2,086 in fiscal 2012, which can
be attributed to increases in inventory, receivables and prepayments, primarily as related to the
opening of new stores and the warehouse.
Net Cash Flow Generated from Investing Activities
Cash flow from investing activities primarily comprises the purchase of plant and equipment, which
increased from TEUR 77 in 2010 to TEUR 137 in fiscal year 2011 and decreased slightly to TEUR
135 in fiscal 2012, reflecting the purchase of plant and equipment.
Net Cash Flow Used in Financing Activities
Cash flow from financing activities comprises mainly the advances from related parties, lease
financing and bank borrowing. Net cash used in financing activities was TEUR 26 for fiscal 2010,
and TEUR 25 in fiscal 2011, increasing to TEUR 2,483 in fiscal 2012. This increase largely reflects
the repayment of a loan to one director and an increase in bank borrowing.
Cash and Bank Balance at End of Financial Year
In keeping with the changes discussed above, cash and bank balance at end of financial year
amounted to TEUR 175 and TEUR 210 as at 30 September 2010 and 2011, increasing to TEUR
488 at fiscal yearend 2012.
Off-Balance Sheet and Other Arrangements
PRM does not have any off-balance sheet obligations or transactions. There are no other
obligations or risks that are not reflected in the financial statements of PRM entities or disclosed in
the notes to the financial statements.
Critical Accounting Policies
PRM has identified the following critical accounting policies which require its management to make
assumptions about matters that were uncertain at the time those policies were applied, and with
respect to which the Company’s management could reasonably have made different assumptions
in the relevant period, or with respect to which changes in the assumptions reasonably likely to
occur from period to period would have a material impact on the presentation of its financial
condition, changes in financial condition or results of operations. Investors should read the
following paragraphs in conjunction with the audited financial statements and interim financial
statements, including the related notes, set out in the section headed “Financial Section” of this
Prospectus.
Depreciation of Property, Plant and Equipment.
Property, plant and equipment are depreciated on a straight-line basis over their estimated useful
lives. Management determines useful lives of property, plant and equipment to be within three to
five years. Changes in the expected level of usage and technological developments could impact
the economic useful lives and the residual values of these assets. Therefore, future depreciation
charges could be revised. A 5% change in the expected useful lives of the property, plant and
equipment would not result in a significant change to PRM’s net profit for the respective financial
years.
98
Inventories
Inventories are measured at the lower of cost and net realizable value. Cost is determined using
the weighted average method and comprises design costs, raw materials, direct labor, other direct
costs and other costs incurred in bringing the inventories to their present location and condition
.Net realizable value is the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the sale.
Critical Accounting Estimates and Judgment
Estimates and judgments are continually evaluated and are based on historical experiences and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances. PRM makes estimates and assumptions concerning the future. The resulting
accounting estimates and assumptions that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Critical Judgment Made in Applying Accounting Policies
In the process of applying PRM’s accounting policies as described below, the Company’s
management is of the opinion that there are no instances of application of judgments that are
expected to have a significant effect on the amounts recognized in the Financial Statements.
Impairment of Trade Receivables
PRM’s management assesses the collectability of trade receivables. This estimate is based on the
credit history of PRM’s distributors and the current market condition. Management assesses the
collectability of these trade receivables at the statement of financial position date and makes the
provision, if any.
Other operating expenses
Other operating expenses comprise mainly expenses relating to the preparation of the Offering
charged off amounting to EUR 500,000.00 in accordance with the requirements of HGB and the
supplementary provisions of the German Stock Corporation Act (AktG) as well as audit and
accounting fees amounting to EUR 20,000.00. Under IFRS, other operating expenses comprise
mainly expenses relating to the preparation of the Offering charged off amounting to approximately
EUR 20,000.00 as well as audit and accounting fees amounting to EUR 75,000.00. The lower
operating expenses are due to the capitalization of certain qualifying expenses incidental to the
preparation of the Offering, which is permitted under IFRS.
Industry Overview
Market and industry information and statistics set out in this section and elsewhere in this
Prospectus have been extracted from the sources set out in the section headed General
Information - Information Derived from Third Parties.
No independent verification has been carried out on such information and statistics. Reasonable
care has been exercised in extracting and reproducing such information. However, the Company
makes no representations as to the accuracy of such information and statistics, which may be
inaccurate, incomplete, out-of-date or inconsistent with each other or with other information.
Market Opportunity
Fresh and dried seafood products have been a traditional part of the Pacific Rim population’s diet
for thousands of years. This is particularly true in Hong Kong, which not only provides for its native
population, but serves as a trading intermediary for Mainland China.
In July 2003, six years after sovereignty over Hong Kong reverted to China; the Chinese
Government implemented the Individual Visitor Scheme (“IVS”) policy, permitting the residents of
99
specified cities within Mainland China to travel to Hong Kong as free individuals. From 2009 people
from some cities including Shenzhen can travel to Hong Kong on an unlimited basis with a yearly
visa. Except for that, prior to IVS, Mainland residents could only visit Hong Kong and Macau on
business visas or group tours, and were required to follow a pre-approved itinerary.
The intent of the policy was to improve the economies of Hong Kong and Macau, and it has been
highly effective. As a result of IVS, Hong Kong has enjoyed tremendous increases in the number of
tourists from the People’s Republic of China Mainland. According to the Hong Kong Tourism Board
(HKTB) overall visitor arrivals to Hong Kong in 2010 totaled just over 36 million, a 21.8% increase
over the previous year 8. These numbers included approximately 22.5 million Mainland Chinese
arrivals, 8.2 million short-haul (less than a 3 hour flight, excluding Mainland) arrivals, and 4.8 million
long-haul (greater than a 3 hour flight) arrivals. In July 2011 9 more than 3.8 million visitors arrived in
Hong Kong, equivalent to more than half of Hong Kong's population, which set an outright record
for a single month.
The IVS has affected changes in Hong Kong’s retail environment, and many shops situated in high
traffic tourist locations have experienced substantial growth in sales. Business travel to Hong Kong
has increased as well as more Mainland Chinese firms opening offices in Hong Kong.
With the new freedom of travel within Hong Kong resulting from the IVS, shopping has become a
popular activity for visitors, and purchasing gifts for friends and relatives is quite common. This has
been a particular boon for international luxury brand handbags, watches, and clothing, in addition
to traditional dried seafood (such as dried abalone, bird’s nest and sun-dried fish maw). In addition
to these big-ticket items, tourists are regularly purchasing over-the-counter (OTC) medicines,
health supplements and other daily necessities, which are more readily available in Hong Kong.
Dried Seafood Sector
The Trade Association of Dried Seafood estimated that the daily trading value of retail and
wholesale sectors of the industry is approximately annual value of €6.8 billion worldwide.
Hong Kong’s dried seafood and delicacies sector is highly fragmented. There are a limited number
of small chain operations. However, the vast majority of stores are small, independent shops.
Typically family owned, most of these operations follow conservative, if not antiquated ways of
doing business and are reluctant, or lack the resources to adapt to changing market conditions.
Traditional Chinese and Western Medicine
The global market for Traditional Chinese Medicine (TCM) has been rapidly developing since the
late 1990s. In 2010, the output value of TCM amounted to approximately $50 billion, and forecasts
indicated that this would rise to $120 billion in 2025.
Western drugs are expected to continue to hold a significant share of China’s pharmaceutical
market. Sales of proprietary prescription drugs are expected to grow, as well as over-the-counter
products. However, traditional medicines are firmly entrenched in the culture and make up a very
significant market for growers, manufacturers, prescribers, distributors and retailers. In some
categories, sales of traditional medicines exceed the spending on Western pharmaceuticals.
The following table illustrates the breakdown of China’s pharmaceutical market by segment.
8
Hong Kong Tourism Board (HKTB) VISITOR ARRIVALS ,
http://202.85.167.201/pnweb/jsp/doc/listDoc.jsp?doc_id=139521
9
The Hong Kong Tourism Board (HKTB), Tourism Performance,
http://www.tourism.gov.hk/english/statistics/statistics_perform.html,
100
Source: KPMG, China’s Pharmaceutical Industry, 2011
2011 KPMG Advisory (China) Limited
Competitive Overview
Hong Kong’s dried seafood market, which has been active since the late 18th century, is extremely
fragmented. There is a highly populated “dried seafood district” located on Des Voeux Road West
near the Hong Kong-Macau Ferry Terminal in Sheung Wan, where there are approximately 200
small shops.
The vast majority of shops in Hong Kong are small with limited inventory and there are only a very
few large operators. PRM’s management is aware of primarily two multi-location companies in the
Hong Kong market; Beijing Tong Ren Tang, which focuses on Chinese herbs, and Home of
Swallows, which focuses on bird's nests. Not only do both of these companies have a narrower
focus than that of PRM Group, management believes that its products are of a higher quality and
variety
Although the market is quiet competitive, several factors influencing the success of a given shop.
While pricing is certainly influential, because many of the products are considered to be luxury
items, it is often not the primary factor. Product quality, availability, breadth of inventory, store
location, service level and staff knowledge are all influential in a consumers purchase decision.
Surveys show that at least 25% of customers prefer patronizing one shop and 44% would go to the
same shop more often than not 10.
PRM Group is extremely conscientious of these factors and operates accordingly. Senior
management has more than 100 years cumulative experience in the market and has strong
relationships with suppliers, customers and local governments, facilitating their ability to secure
ample supply of high quality products. They are also extremely knowledgeable of all products sold
in their shops as well as their competitors’.
Furthermore, all Shang Yu Tang staff members are trained to provide excellent customer service,
and are specifically instructed with regard to the unique cultural and customary habits of different
communities.
Management believes that PRM Group has a strong competitive advantage within the market,
which will enable it to successfully expand the operation both organically and by acquisition.
10
Jeffrey Chang: What is the market structure of the dried seafood market in Sheung Wan - Hong Kong?,
http://www.tuition.com.hk/dried-seafood-hong-kong.htm
101
Business Overview
Initially established in 1999 on Nathan Road in Jordan, the Company operated as a single location
for until 2008 when a second unit was opened and a third store was brought onboard in 2009.
Since then PRM Group accelerated the expansion adding two stores in 2010 and five in 2011.
Today the Company operates 10 retail stores and one wholesale operation with 71 full time
employees. Each location is indicated on the following map.
Each store operates as a separate profit center; however the network is overseen and inventoried
by a centralized management team with substantial market expertise.
Shang Yu Tang
PRM Group currently operates three types of retail shops under the name Shang Yu Tang; which
are “flagship” stores where customers can purchase all of the Company’s products, “corner stores”
which offer PRM Group products along with third party merchandise, and specialty boutiques,
which are smaller and primarily offer packaged delicacies for gift purchases. The following table
illustrates the differences between them.
102
Store Type
Approximate Store
Flagship
Specialty
Corner
Product Mix
Size
> 1,500 sq. ft.
750 sq. ft.
500 - 600 sq. ft.
Dried Seafood
40%
Chinese Herbal Medicine
20%
Daily/Personal Care Products
40%
Dried Seafood
80%
Chinese Herbal Medicine
20%
Daily/Personal Care Products
-
Dried Seafood
60%
Chinese Herbal Medicine
20%
Daily/Personal Care Products
20%
Stores are located in high traffic areas, including shopping areas, hotels, near convention and
exhibition centers, historical sites and typical tourist attractions. The Company also operates one
“wholesale” distribution facility, which is open to individual consumers and other retailers.
All stores are similarly stocked, however each one is inventoried based on the distinct
characteristics of the typical customers in their region. For example, more expensive gift items are
stocked in stores near five-star hotels and corporate offices, whereas popular supplements and
personal care products are found in stores in areas with more traditional tourist or residential traffic.
In addition to its retail stores, PRM Group has launched online shopping on its website
www.shangyutang.com.hk with the beginning of 2013, and currently limits any online sales to
customers in Hong Kong only. As of the date of this Prospectus, the management of PRM has no
plans to expand its offer for online shopping beyond Hong Kong.
Products
While PRM Group is known for its dried delicacies product selection, the Company also sells a
variety of traditional Chinese herbal medicines and supplements, over the counter and personal
care products. The following table illustrates each category’s contribution to revenues and gross
profit.
Category
Sales Proportion
Gross Profit
Dried Seafood
45%
40%
Chinese Herbal Medicine
25%
50%
Chinese Supplements
20%
30%
Daily/Personal Care Products
10%
10%
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DRIED SEAFOOD
Dried seafood products have a long, important history in China. Until the 1960s, all fish and
perishable products had to be preserved due to a lack of refrigeration. Only consumers living in
coastal communities ate fish regularly. Today, the distribution and storage of seafood products are
more efficient, income levels have increased, and refrigeration is common.
Seafood consumption is slowly rising farther inland as the income levels throughout China increase
with the growing economic prosperity. These changes have led to China importing more seafood to
satisfy market demand. And while fresh seafood is a common choice for everyday consumption,
dried seafood and delicacies such as those sold at the Company’s Shang Yu Tang stores, are still
in high demand for gifts and special occasions.
Following is an overview of the Company’s most popular dried delicacy products (pricing is listed
for 640 gram portions – the traditional measure used for these products)>
Dried Abalone
Abalone has long been a valuable food source. Similar to shark fin
soup or bird nest soup, it is considered a luxury item and is
traditionally reserved for special occasions such as weddings and
other celebrations. They are frequently used in Chinese New Year
dishes as well as being a common New Year’s gift. Dried abalone is
valued for its resemblance to the ancient Chinese ingots used as
currency. The texture is similar to a meaty, chewy mushroom, and it is
typically cooked in a rich soy-based broth.
Dried Abalone retail selling prices range from US$360 to US$4,000 per 640 grams.
Sea Cucumber
Sea Cucumber is a gelatinous aquatic creature which is thought to
contain minerals that help build healthy joints, as well as improving
blood circulation disorders and lowering blood pressure. Sea cucumber
works well in soups and is often found in combination with bamboo
shoots, mushrooms, chicken broth, and various seasonings.
Sea Cucumbers retail selling prices range from US$88 to US$1,235 per 640 grams.
Ginseng Root
Dried Asian ginseng roots have been used in herbal remedies for hundreds of
years, with users experiencing a number of benefits, including increased resilience
against pressure, distress, nervousness and exhaustion; enhanced sexual desire;
increased mental and physical activity levels; treatment of type II diabetes, and
other disorders.
Ginseng root retail selling prices range from US$35 to US$14,567 per 640 grams.
Shark’s Fin
Shark’s fin soup is a delicacy consumed from as early as the 18th
century. Today, it is considered to be a luxury item in Chinese culture
and seen as a symbol of wealth, power and prestige. It is considered
an essential part of celebrations on special occasions such as
weddings and banquets, where it is viewed as a symbol of respect and
admiration for guests
Management is aware of the negative associations with shark fin soup;
104
however, it is an important part of Chinese culture and only represents approximately 2% of PRM’s
sales. The retail selling price of Shark Fin ranges from US$253 to US$897 per 640 grams.
Fish maw
It is a common ingredient in Chinese cooking, and is primarily used in soups.
Fish maw is an excellent source of collagen and is considered by many
Chinese to improve skin texture. Fish maw is also recognized for helping
pregnant women with fertility and blood circulation.
Fish Maw retail prices range from US$49 to over US$4,576 per 640 grams.
Edible Bird's Nest
Edible bird's nest is widely used in Chinese culture, with use traced back to the 17th century. Made
from the nests of swallows, insectivorous birds whose nests are constructed
with salivary glue, edible bird's nest contains several organic nutrients
having benefits documented by traditional Chinese medicine practitioners to
enhance the rebirth of cells and tissues and boost the body's immune
system through promotion of cell division. Traditionally, it is double boiled
with rocky sugar to make the delicacy known as "bird's nest soup" which is
rich in antioxidants and is used to improve heart functions, reduce blood pressure, and aid in the
treatment of cancer patients.
Bird’s nests retail prices range from US$514 to US$4,134.
Cordyceps
Cordyceps, also referred to as caterpillar fungus, has a long history as
medicinal fungi. The name translates to "winter worm summer grass”.
During the winter Cordyceps fungus grows solely inside a host
caterpillar, then, in summer it produces an outer growth, and it is these
brown stalks that are eaten or prepared in a tonic. The earliest
recorded use of Cordyceps is in the 15th century, however they were
relatively unknown around the world until it was credited for the
success of Chinese women athletes at the National Games in Beijing,
in 1993. Three Chinese track runners set new world records during the
Games at three different distances and their coach attributed the runner’s success to intensive
training as well as a stress-relieving tonic prepared from the caterpillar fungus.
Cordyceps retail prices range from US$10,036 to US$32,493 per 640 grams.
Wholesale Distribution
The Company’s wholesale division procures and manages inventory for each of PRM Group’s retail
shops as well as third parties, including competing shops. The Company also operates a wholesale
shop open to consumers.
Management has benefited from its wholesaling capability as complemented by a retail outlet.
Products sold at this store are sold in bulk rather than individual packaging, lowering the cost for
PRM Group. Not only can they supply other storeowners, retail customers like to shop at the
wholesale location, thinking that the prices are lower. This is not always the case, but the broad
variety of products cannot be found in other smaller outlets, thus making the experience
physiologically more attractive to consumers.
Sales and Marketing
PRM Group’s marketing and promotion strategy is designed to build brand recognition and
increase customer traffic to its stores by attracting new customers and building customer loyalty in
105
order to maximize repeat customer visits. The corporate marketing team oversees all advertising
campaigns and regional promotional activities for the retail stores and wholesale distribution facility.
Retail store campaigns are created in conjunction with suppliers and store managers, who are
encouraged to propose their own advertising and promotion plans, including special discounts and
gift promotions for selected merchandise.
Customers
Mainland Chinese visitors and other tourists account for approximately 65% of PRM’s sales, with
the remaining 35% attributed to local residents. While some product is currently available in the
PRC, visitors tend to purchase from Hong Kong retailers because they can trust the quality and
authenticity of the products. Revenues are evenly driven between gifts and personal use.
Businessmen have also become greater customers as PRC and Asian companies open regional
offices in Hong Kong. They tend to purchase PRM products as gifts for important customers and to
be served at important corporate events.
PRM’s Strengths The Company believes the following to be the key factors for its future
growth:
Clear and Unique Positioning of PRM’s brands and products
Most of the products that PRM sells, especially dried seafood, are purchased directly from
suppliers, so the retail price can be more competitive while profit can be maintained at the same
time. Some competitors offer the same product mix as PRM but the quality is different. Those
competitors are mostly family owned and small. PRM is focused on dried seafood and
supplements, which can generate more profit than the other products. Traditionally, dried seafood
store use manual bookkeeping systems. This results in a difficulty in monitoring product inventory.
Computerization of PRM’s operations enable management to closely monitor inventory and retail
prices which is quite a new practice in the industry. Although the PRM brand is relatively new in
Hong Kong’s dried seafood market, the demand for the products that the Company sells is high
and growing, so the Company’s brand has gained a reputation and is easily differentiated by
consumers for its freshness.
Established business model and extensive network
The operation of the Company’s stores is flexible and more customer oriented than that of most
competitors. PRM operates 10 retail stores, located throughout Hong Kong’s most of the popular
retail districts. The Company intends to open additional stores in 2013 with the objective of
increasing its market share and thereby revenues and profitability. The Company has also been
able to generate revenues and income, as well as garner customer loyalty by enabling mainland
Chinese customers to order products that are not sold in the store, and then have them shipped to
China. This is not a common industry practice, thus providing the Company with a competitive
advantage.
Experienced and well-connected management team
All members of PRM’s management team have over 20 years of procurement and/or retail
experience in the industry. They have well established connections with both suppliers and
competitors, some of whom are also wholesale customers. Management’s expertise and
connections provide benefits including cost controls, the ability to identify, purchase and sell high
quality products and most importantly, the ability to quickly respond to market changes.
Well-trained and knowledgeable sales force
The Company’s retail and wholesale sales personnel are typically experienced in the industry and
are well versed on product benefits, dried seafood preparation and cooking techniques and
recipes. PRM provides regular sales training to further enhance its sales team’s product knowledge
and selling skills.
106
Business Intelligence
With its Management Information System, Customer Profile Database and Point of Sale systems,
PRM collects and maintains both a product and customer database. This helps identify new
opportunities as well as enabling the Company to implement effective marketing strategies, and
results in what the Company believe is a competitive marketing advantage and a platform to
enhance long-term business growth.
Wholesaling Capability
Besides its retail business, PRM also operates a wholesale business. This revenue has grown
rapidly and PRM is capable of expanding this segment because of the relationships of members of
its management team.
PRM has created a multi-pronged strategy to establish the Company as a leading
Strategy participant in the dried seafood delicacies and herbal supplement sector. In addition to
leveraging its existing infrastructure and expanding its operation both organically and
potentially through acquisitions, management intends to implement the following tactics to achieve
this objective.
Build Brand Awareness
The Company has implemented several initiatives to build awareness of the business and existing
locations.
Signage and Packaging – The Company is in the process of standardizing the signage
and packaging for all its stores. The Company has also implemented a marketing
campaign throughout Hong Kong.
Loyalty Program – Shang Yu Tang has initiated a customer loyalty program for repeat
customers, providing them with special promotions, discounts on purchases and other
benefits in exchange for their patronage.
Travel Group Cooperation – PRM is working in conjunction with tour companies to
facilitate bringing additional tourist traffic to the Company’s Shang Yu Tang stores.
Trade Show – PRM has participated in the most popular industry trade shows including
Hong Kong’s Food Expo. This has proven to be of significant value to the Company as it
has enhanced its brand awareness and showcased its quality products to potential
wholesale customers and consumers.
Joint Promotion & On-site Marketing Campaign – PRM has entered into a credit card
joint promotion with major financial institutions such as The Bank of East Asia and Hang
Seng Bank, and media companies in Hong Kong to promote its brand and stores to local
Hong Kong consumers as well as tourists from Mainland China. The Company is also
participating in and implementing in-mall marketing campaigns for its Stores that are
located in shopping malls.
E-Marketing – To diversify and expand its sale channels, the Company intends to promote
its Shang Yu Tang brand and products through the Internet. The Company believes that
online sales will become significant, especially with consumers in China. This online sales
strategy is being implemented at the Company’s Shang Yu Tang website.
Management is confident that these activities will expedite brand awareness within the
marketplace.
As PRM expands its retail network, management is working to ensure a consistent brand image at
all its locations. Each new store is launched with an aggressive campaign targeted to the local
community, with the objective of building a relationship with local consumers.
Implement Information Network
107
In addition to introducing standardized packaging and signage in all its stores, PRM has
implemented an electronic Management Information System, a Customer Profile Database, and a
Point of Sale System. All of these systems are facilitating internal controls including sales records,
inventory controls, and cash flow management.
PRM’s Customer Profiling System is essential in providing the data for the Company’s customer
loyalty program. The System provides direct access to current customer information, which is used
in marketing campaigns designed to prompt impulse purchases and targeting of customers for
specific product promotions.
As the Company broadens its operations, its management intends to implement a customized
logistics platform. The planned platform will enable real-time online ordering, product look-up,
billing compilation and payment, inventory management, order and delivery status, administration
of supplier and customer accounts, and sophisticated report generation and data analysis.
Expansion of the Retail Network
The dried delicacies sector is typical of a mature, highly fragmented market. In Hong Kong it is
comprised of many small retailers without the resources or desire to expand their business. PRM
has implemented a traditional roll-up strategy to build its footprint in this marketplace. By offering
access to a modern IT platform, cumulative purchasing power, marketing and brand name
recognition, PRM believes it will continue to be the acquirer of choice for independent storeowners.
As has been the case in the past, the Company intends to use a combination of stock and cash to
execute this strategy in the future.
New stores will be added through both acquisition, and when appropriate by the establishment of
new store locations. New locations will be financed from operations, and may be supplemented
thought debt or equity capital. Locations will be selected based on a variety of factors, including
neighborhood demographics, foot traffic, projected leasehold costs and proximity to competitors.
PRM opened two stores in Hong Kong in September 2012. The Company confirmed that it will
open another flagship store in Hong Kong in April 2013,.
Once a location is identified and a lease is signed, leasehold improvements are made. During this
process, employees are hired and trained at existing locations. This training includes company
policies, customer service, and store operations. A customized pre-launch marketing campaign is
implemented to introduce the new store and its products to residents in the area.
Longer Term Strategies
Management’s initial focus will be based on the strategies outlined above. The Company will also
consider additional opportunities to expand its operations in response to market conditions and
demand, or if an attractive opportunity or business direction is identified. Currently Company
management is undertaking the following initiatives as part of its long-term strategy.
The Introduction of Private Label Products: Management believes that private label
products would provide the Company with several benefits, including improved brand
name awareness, greater control over product quality and attributes, potentially greater
gross margins, and increased pricing flexibility.
Establishment of an Export Business: PRM is evaluating the opportunity of exporting
products to countries where there is a significant Chinese population and/or demand for
traditional Chinese medicines and supplements. Management believes that the United
States and Canada may be excellent export markets.
Entering New Geographic Markets: PRM’s expansion plan may include expanding into
China itself, however, the decision of doing so has not been made. Due to the size of the
China market and the complexities of doing business in the PRC, this may require several
business models which have not been fully evaluated nor determined yet.
108
Further Developing the Brand and Franchising and Licensing Opportunities: The
Company’s Shang Yu Tang’s trademark is displayed on all store signage and products and
is a valuable Company asset. The potential of licensing and/or franchising will be evaluated
as a way to expand PRM’s market presence in additional geographical regions.
Vertical Integration: As the Company’s retail and wholesale businesses grow, the
Company will evaluate direct sourcing and manufacturing of some of the products it sells.
This will potentially provide the Company with greater pricing flexibility and will likely result
in improved margins. The Company also will evaluate developing and processing its own
branded product line. A private brand product line could provide a higher contribution to
PRM’s profit margin and enhance its competitive advantages.
Horizontal Integration: In addition to organic growth, the Company can accelerate its
expansion through the acquisition of established competitors. As has been the case
historically, this may be accomplished utilizing cash, stock, or some combination of both.
Business Model
PRM Group operates three types of retail shops under the Shang Yu Tang brand; “flagship stores”
where customers can purchase all of the PRM’s products; “corner stores” which offer the products
of PRM along with third party merchandise; and specialty boutiques, which have smaller and
primarily offer packaged delicacies for gift purchases. The size of the stores varies from more than
1,500 sq. ft. (flagship store) to approx. 500 sq. ft. (corner stores), to 750 sq, ft, for the specialty
boutiques..
All three types of stores are located in high traffic areas, including shopping areas, hotels, near
convention and exhibition centers, historical sites and tourist attractions.
The PRM also operates one wholesale distribution facility/store, which is open to individual
customers as well as other retailers.
All stores have similar inventories; however each one is stocked based on the distinct
characteristics of the local customers. For example, more expensive gift items are inventoried in
stores near five-star hotels and corporate offices. Popular nutritional supplements and personal
care products are inventoried in stores in areas with more traditional tourist and local resident foot
traffic.
109
The Company’s Brand and Products
PRM sells dried seafood as well as a variety of traditional Chinese herbal medicines and
supplements.
Dried seafood products have a long history in China. Until the 1960s, all fish and perishable
products had to be preserved, as access to refrigeration was not widespread in Hong Kong or
China. Only consumers living in coastal communities ate fish regularly. Today, the distribution and
storage of seafood products are more efficient, income levels have increased and refrigeration is
common, both in Hong Kong and in China.
With rising income levels throughout China, seafood consumption has increased. While fresh
seafood is a common choice for everyday consumption, dried seafood is still considered a delicacy
and is especially in high demand for gifts and special occasions.
The following is an overview of PRM’s most popular dried delicacy products. The prices listed refer
to 640 gram portions, which is the traditional measure used for these products.
Dried Abalone
Abalone has been a valuable food source for a long time. Similar to bird nest soup, it is considered
a luxury item and is traditionally reserved for special occasions such as weddings and other
celebrations. Dried abalone is frequently used in Chinese New Year dishes as well as being a
common gift for the Chinese New Year. Dried abalone is valued for its resemblance to the ancient
Chinese ingots used as currency. Dried Abalone prices range from EUR 275 to EUR 3,060 per 640
grams.
Sea Cucumber
Sea cucumber is widely thought to contain minerals that help build healthy joints, as well as
improving blood circulatory disorders and as a way of lowering blood pressure. Sea cucumber is
used as an additive in l in soup and is often found in combination with bamboo shoots, mushrooms,
chicken broth and various seasonings. Its prices range from EUR 50 to EUR 945 per 640 grams.
Ginseng Root
Dried Asian ginseng roots have been used in herbal remedies for centuries. They are commonly
thought to provide numerous benefits, including resilience against emotional distress, nervousness
and exhaustion. Ginseng root is also thought of as a product that will enhance sexual desire,
increase mental and physical activity, as a treatment for type II diabetes and for other disorders.
Ginseng root prices range from EUR 26 to EUR 11,128.
Shark’s Fin
Shark’s fin soup is a delicacy that has been consumed since the 18th century. Today, it is
considered a luxury item in Chinese culture and seen as a symbol of wealth, power and prestige. It
is considered an essential part of special occasion celebrations including weddings and banquets
where it is viewed as a symbol of respect and admiration of guests. PRM is aware of the
environmental and sustainability issues associated with shark fin soup. Sales of shark’s fin only
represent approximately 2% of PRM’s sales. Prices can range from EUR 194 to EUR 686 per 640
grams.
Fish maw
Fish maw is an internal organ, which enables fish to maintain their buoyancy. Fish maw is an
internal organ with the function of helping fish maintain their buoyancy. It is a common ingredient in
Chinese cooking and is primarily used in soups. Fish maw is a source of collagen and is
considered by many Chinese to improve skin texture. Fish maw is also recognized for helping
pregnant women with fertility and blood circulation. Fish maw prices range from EUR 28 to over
EUR 3,500 per 640 grams.
Edible Bird’s Nest
Edible bird’s nest has strong historical roots in Chinese culture, and can be traced backing to the
17th century. Made from the nests of swallows, insectivorous birds whose nests are constructed
with salivary glue, edible bird’s nest contains several organic nutrients that traditional Chinese
medicine practitioners believe enhances the rebirth of cells and tissues and boosts the body’s
immune system through promotion of cell division. Traditionally, it is double steamed with rock
sugar to make the delicacy known as “bird’s nest soup” which is rich in antioxidants and is used to
110
improve heart functions and to reduce blood pressure. Bird’s nests range in price from EUR 393 to
EUR 3,162 per 640 grams162.
Cordyceps
Cordyceps, also referred to as caterpillar fungus, has a long history as a medicine fungus. The
name translates to “winter worm summer grass.” During the winter, cordyceps fungus grows inside
a host caterpillar. Then, in summer it produces an outer growth, and it is these brown stalks that
are eaten or prepared in a tonic. The earliest recorded use of cordyceps is in the 15th century.
Cordyceps range in price from EUR 77,677 to EUR 2424,854 per 640 grams
Herbal Medicine
Herbal medicine has an extensive history in China. There are an estimated 8,000 herbal medicines
on record, although only approximately 700 of them are commonly used. Many people seek advice
from herbal medicine practitioners not only to cure disease but also to reinforce vital essences of
the body. PRM Stores have Chinese herbal medicine practitioners on staff, and herbal medicine
sections to sell herbal medicine prescriptions. Prices vary depending on the product.
Health Supplements
Traditional Chinese health supplements have been used by the Chinese for centuries and are now
increasingly common in other populations. There are an estimated 10,000,000 Chinese patent
medicines available in Hong Kong and the number is increasing. It is common for Mainland
Chinese to visit Hong Kong with the sole objective of purchasing these health supplements. All
supplements sold in Hong Kong must bear nutrition labels while those containing drug ingredients
and Chinese herbal medicines must be patented. Prices vary based on the product.
Sales and Distribution
Intellectual Property
Other than its trademarks and domain names listed in this document, and “know how”, which
cannot be officially protected, the Company does not have any additional intellectual property,
including copyrights or trade secrets.
Trademarks
Registered Trademarks
PRM is the registered or beneficial owner six registered trademarks in the jurisdictions mentioned
below, including the following:
Trademark #1:
尚誉(Chinese characters with design and colors)
The meaning of these Chinese characters are:
尚 - prestige; high class; dignity; respectable; lofty; premium
譽 - renown; goodwill; reputable; fame; honor
Filing Date: December 29, 2011
Filing no.:
302126989
Class(es):
03,05,16,29,30,35
Applicant:
Giant Luxury Holdings Limited
Current status:
pending
Mark:
111
Goods/Services:
CLASS 3: Bleaching preparations and other substances for laundry use; cleaning, polishing,
scouring and abrasive preparations; soaps; perfumery, essential oils, cosmetics, hair lotions;
dentifrices.
CLASS 5: Pharmaceutical and veterinary preparations; sanitary preparations for medical purposes;
dietetic food and substances adapted for medical or veterinary use, food for babies; dietary
supplements for humans and animals; plasters, materials for dressings; material for stopping teeth,
dental wax; disinfectants; preparations for destroying vermin; fungicides, herbicides.
CLASS 16: Paper, cardboard and goods made from these materials, not included in other classes;
printed matter; bookbinding material; photographs; stationery; adhesives for stationery or
household purposes; artists’ materials; paint brushes; typewriters and office requisites (except
furniture); instructional and teaching material (except apparatus); plastic materials for packaging
(not included in other classes); printers’ type; printing blocks.
CLASS 29: Meat, fish, poultry and game; meat extracts; preserved, frozen, dried and cooked fruits
and vegetables; jellies, jams, compotes; eggs; milk and milk products; edible oils and fats.
CLASS 30: Coffee, tea, cocoa and artificial coffee; rice; tapioca and sago; flour and preparations
made from cereals; bread, pastry and confectionery; ices; sugar, honey, treacle; yeast, bakingpowder; salt; mustard; vinegar, sauces (condiments); spices; ice.
CLASS 35: Advertising; business management; business administration; office functions.
Jurisdictions: Hong Kong
Trademark #2:
尚譽(Chinese characters with design and colors)
The meaning of these Chinese characters are:
尚 - prestige; high class; dignity; respectable; lofty; premium
譽 - renown; goodwill; reputable; fame; honor
Filing Date:
Filing no.:
Class(es):
Applicant:
Current status:
Mark:
March 2, 2012
302178405
16,35,44
Giant Luxury Holdings Limited
pending
112
Goods/Services:
CLASS 16: Paper, cardboard and goods made from these materials, not included in other classes;
printed matter; bookbinding material; photographs; stationery; adhesives for stationery or
household purposes; artists’ materials; paint brushes; typewriters and office requisites (except
furniture); instructional and teaching material (except apparatus); plastic materials for packaging
(not included in other classes); printers’ type; printing blocks.
CLASS 35: Advertising; business management; business administration; office functions.
CLASS 44: Medical services; veterinary services; hygienic and beauty care for human beings or
animals; agriculture, horticulture and forestry services.
Jurisdictions: Hong Kong.
Domain Names
PRM is the registrant of the following domain names:
Domain name
Expiry Date
giantluxury.com
10/13/2013
pacificretailmerchants.com
05/09/2014
shangyutang.com.hk
04/25/2015
113
Employees
Number of Employees
PRM had a total of 6, 17 and 39 employees as at 30 September 2009, 2010 and 2011,
respectively.
The following table sets forth a breakdown of employees by department as of 30 September 2012:
Function
Number. of
Percentage of total
employees
Chief Executive Officer
1
1.3
Director
3
3.8
Managing Director
1
1.3
Marketing Assistant
1
1.3
Accounting Manager
2
2.6
Assistant Design Manager
1
1.3
Accounting Officer
1
1.3
Retail Operation Officer
1
1.3
Senior Marketing Executive
1
1.3
Senior HR & Administration
1
1.3
Personal Assistant
2
2.6
Assistant Accounting
1
1.3
Assistant Marketing Manager
1
1.3
Accounting Assistant
2
2.6
Accounting Supervisor
2
2.6
HR & Administration, Sales
57
73.1
78
100%
Officer
Manager
Personell
Total
As at the date of this prospectus, there has been no material change in the number of employees
from the total as of the end of September.
114
Training
PRM aims to develop its staff internally through training its existing employees. PRM provides
induction trainings for new employees as well as ongoing training for all of its employees with the
objective of improving their technical skills as well as their knowledge of PRM’s company policies
and operational procedures..
General Overview on Labor Contract
PRM has entered into written labor contracts will all of its employees in accordance with applicable
Hong Kong law. These labor contracts are based on a standard contract prepared and issued by
the local labor authority containing the necessary clauses as stipulated by the local Hong Kong
regulations.
PRM’s employees do not negotiate their terms of employment through any labor union or by way of
collective bargaining agreements.
Remuneration, social security and housing fund
Apart from providing basic salary, PRM is also obliged by Hong Kong regulations to contribute to
mandatory housing funds and social security schemes, including a basic pension contribution plan,
a basic medical insurance plan, an unemployment insurance plan, a work related insurance plan
and a maternity insurance plan for its employees as required under the social security related laws
and regulations in Hong Kong.
115
116
Real Estate
PRM has not in the past, nor as of the date of this Prospectus, own any real property. PRM
currently leases 12 properties with an aggregate gross floor area of approximately 15,700 sqft. The
chart below sets forth the breakdown of each property’s details:
Description/Location
Lessor
Ground Floor, No. 144 Des
Voeux Road West, Hong
Kong
Ground Floor, No. 4 Fenwick
Street, Wanchai, Hong Kong
Flat A, G/F of Lin Fai House,
Nos. 32-34, Chuen Lung St.,
Tsuen Wan
Shop Nos. 12 & 13, Ground
Floor, Commercial Podium,
Mandarin Plaza, No. 14
Science Museum Road,
Kowloon, Hong Kong
14 Floor, No 80 Gloucester
Road, Wanchai, Hong Kong
Mr. Yuen Ho
Pan
Shops B2 & B3, Ground
Floor, No. 88 Lockhart Road,
Hong Kong
Shop D, Ground Floor, Top
View Mansion No. 10, Canal
Road West, Hong Kong
Shop Nos. 18 & 19A, Level
3, Shatin Plaza, Nos. 21 –
27. Sha Tin, Centre Street,
Shatin N.T.
Mezzanine and Ground
Floor, No. 320 Nathan Road,
Kowloon, Hong Kong
Flat B on 10/F, On Loong
11
Gross Floor
Area (appr.
16,500) in
Squarefeet11
800
Tenure
Annual
Rent HKD
Use of
Property
14 May 2012 to
13 May 2014
1,140,000
Shop
Tsang Hui
Man
Giant Royal
Medicine Ltd
450
16 Aug 2011 to
15 Aug 2013
01 Sep 2012 to
31 Aug 2013
1,056,000
Shop
1,380,000
Shop
Ip Kin Chung
800
16 May 2011 to
15 May 2014
1,176,000
Shop
Giant Luxury
Holdings
Limited
Tsang Hiu
Man
2,500
12 Dec 2011 to
11 Dec 2013
960,000
Office
400
28 Oct 2011 to
27 Oct 2013
780,000
Shop
Hing Lung
Medicine
Company
Ltd
Giant Luxury
Holdings Ltd.
800
20 Feb 2010 to
19 Feb 2013
1,044,000
Shop
750
10 Jul 2012 to
29 Jun 2015
Shop
Hing Lung
Medicine
Company
Ltd
Giant Luxury
850
01 Sep 2012 to
31 Aug 2014
4,056,000
(or 12% of
the monthly
turnover for
calculation
of the
monthly
rental,
whichever
is the
higher) for
the 1st and
2nd year
respectively
, 4,296,000
(or 12% of
the monthly
turnover for
calculation
of the
monthly
rental,
whichever
is the
higher) for
the 3rd year
1,104,000
6,000
20 Mar 2012 to
300,000
Warehous
700
Shop
100 squarefoot convert into 9,29 squaremeters
117
Factory Building, Nos 11-13,
Luk Hop Street, Kowloon,
Hong Kong
Shop No. 123A, Level One,
Wong Tai Sin Plaza, 103
Ching Tak Street, Wong Tai
Sin, Kowloon, Hong Kong
Shop No.2A1, Ground Floor,
Yau Kwong Building, Nos.
418 – 430 Hennessy Road, 9
Canal Road West, Hong
Kong
Holdings Ltd
19 Mar 2015
e
Giant Luxury
Holdings Ltd
2,000
03 April 2012 to
15 Jan 2015
1,056,000
Shop
Tsang Hiu
Man
450
27 Dec 2010 to
26 Dec 2013
1,416,000
Shop
Insurance
PRM has taken the following insurance policies in place:
Insurance
Property
All
Insurance
(Dah Sing)
Public Liability
(Giant Channel)
Insurer
Risks
Employees
Compensation Insurance
(Giant Channel)
Property
All
Risks
Insurance
(Giant Channel)
Shop Package Insurance
(Giant King)
Employees
Compensation Insurance
(Giant King)
Property
All
Risks
Insurance
(Giant King)
Shop Package Insurance
(Giant Ocean)
Employees
Compensation Insurance
(Giant Ocean)
Property
All
Risks
Insurance
(Giant King)
Public Liability
(Giant Top Medicine)
Employees
Compensation Insurance
(Giant Top Medicine)
Public Liability
(Hing Lung Medicine)
Employees
Compensation Insurance
(Giant Top Medicine)
Office Insurance
(Giant Luxury Holdings
Ltd.)
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
Zurich
Insurance
Company Ltd
Term
21 Oct 2011
to
20 Oct 2012
08 Sept 2011
to
07 Sept 2012
08 Sept 2011
to
07 Sept 2012
08 Sept 2011
to
07 Sept 2012
03 June 2012
to
02 June 2013
03 June 2012
to
02 June 2013
03 June 2012
to
02 June 2013
29 April 2012
to
28 April 2013
29 April 2012
to
28 April 2013
29 April 2012
to
28 April 2013
24 May 2011
to
04 March 2012
24 May 2011
to
04 March 2012
07 August 2011
to
06 August 2012
07 August 2011
to
06 August 2012
13 Jan 2012
to
12 Jan 2013
Insured Amount
Premium in
HKD
HKD p. a.
8,500,000
34,000
5,000,000
1,000
100,000,000
2,234
2,500,000
8,750
300,000
750
100,000,000
4,210
2,500,000
8,750
300,000
2,000
100,000,000
4,210
1,000,000
3,500
5,000,000
1,000
100,000,000
2,022
5,000,000
1,000
100,000,000
1,795
Contents: 610,000
Fixed Glass: 20,000
Money: up to 20,000
Crossed Cheques: 500,000
Public Liability: 10,000,000
8,776
118
Public Liability
(Giant Royal)
Property
All
Risk
Insurance
(Giant Royal)
Public Liability
(Giant Luxury Holdings)
Property
All
Risk
Insurance
(Giant Luxury Holdings)
Public Liability
(Universal Medicine)
Employees
Compensation Insurance
(Universal Medicine)
Property
All
Risk
Insurance
(Universal Medicine)
Employees
Compensation Insurance
(Yue York)
Property
All
Risk
Insurance
(Yue York)
Public Liability
(Yue York)
Public Liability (GL IIXII
Limited
Employees’
Compensation Insurance
(GL IIXII Limited)
Fire Schedule (GL IIXII
Limited)
D&O
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
China Ping An
Insurance
(Hong
Kong) Co Ltd
Allianz
Employee Comp.: 100 mill
5,000,000
1,000
2,000,000
7,000
5,000,000
2,000
10,000,000
50,000
10,000,000
1,500
100,000,000
3,878
2,100,000
8,400
100,000,000
2,792
2,500,000
12,500
5,000,000
1,000
10,000,000.00
1,500
12. Sep. 2012 to
11. Sep. 2013
600,000.00
3,324
12. Sep. 2012 to
11. Sep. 2013
3,000,000.00
7,500
01. Mar. 2013 to
28. Feb. 2014
2,000,000.00
4,416
28 Oct 2011
to
06 Oct 2012
28 Oct 2011
to
06 Oct 2012
09 June 2012
to
08 June 2013
09 June 2012
to
08 June 2013
23 Mar 2012
to
22 Mar 2013
23 Mar 2012
to
22 Mar 2013
23 Mar 2012
to
22 Mar 2013
11 Jan 2012
to
10 Jan 2013
11 Jan 2012
to
10 Jan 2013
11 Jan 2012
to
10 Jan 2013
12. Sep. 2012 to
11. Sep. 2013
Investments
PRM has made the following material investments in the financial years, 2010, 2011 and 2012
(interim):
Currency: (EUR)
Items
Leasehold improvement
Financial Year 2010
Financial Year 2011
Financial Year 2012
118,159
239,872
352,449
7,916
22,254
56,397
22,219
22,131
60,757
Office equipment
Motor vehicle
As of the date of this Prospectus, there are no ongoing material investments of PRM and PRM has
not made any firm commitments on future investments.
119
As of the date of this Prospectus, there are no ongoing material investments of PRM – beside any
investments in the usual and operating way of business - and PRM has not made any firm
commitments on future investments.
Awards and Recognitions
PRM has received following awards and recognitions:
Year
Awards or Recognitions:
Awarding bodies :
2012
Quality Tourism Services
Quality Tourism Services
Scheme
Legal Proceedings
On January 18, 2013, a complaint in the form of a so called Writ of Summons was filed against
Giant King Medicine Limited, Hong Kong, one of the subsidiaries of the Giant Luxury. The plaintiff,
Wong To Yick Wood Lock Ointment Limited seeks, among other things, (1) an injunction to restrain
the Company from infringing the Plaintiff’s trade marks; (2) an injunction to restrain the Company
from passing off some products which are not the products of or associated with or licensed by the
Plaintiff; (3) an order for delivery or destruction upon oath of all articles and materials in the
possession, power, custody or control of the Company; (4) an inquiry as to damages; (5) an order
for payment by the Company of all sums found due to the Plaintiff together with such interest; and
(6) others. In essence, the complaint is aiming at preventing the Company to use a trademark
currently owned by Giant King Medicine Limited. In case Giant King Medicine Limited would be the
underlying party in this lawsuit, it could be exposed to damage claims and may have to destroy
certain of its goods.
Material Contracts
The Company has long standing relationships with its suppliers and as is common within the
industry, there are no ongoing written agreements with these suppliers, nor any agreements for the
sale of products.
120
GENERAL INFORMATION ON THE COMPANY
Formation, Business Name, Registered Office, Financial Year and Term of the
Company
The Company is a German stock corporation (Aktiengesellschaft) operating under German law.
The Company was founded as a shelf company by Blitzstart Holding AG with its registered seat in
Munich, registered with the commercial register of the local court of Munich under HRB 128986 by
means of a notarial deed of incorporation (Gründungsurkunde) (Roll of Deeds Number M290/2012
of the notary public, Prof. Dr. Dieter Mayer, Munich, Germany), dated 8 February 2012, with a
registered shared capital of EUR 50,000. The Company was founded under the company name
(Firma) “Blitz 12-402 AG” with its registered business address in Munich, Germany. The formation
of the Company became legally effective upon registration in the commercial register
(Handelsregister) with the local court (Amtsgericht) of Munich on 24 April 2012.
The Company was registered under registration number HRB 198381. Blitzstart Holding AG
subscribed for 100% of the share capital. Upon effectiveness of the Company’s formation, Blitzstart
Holding AG held 50,000 shares, representing 100% of the share capital. Blitzstart Holding AG
transferred all of the shares to Mr. Chung Wing Chin under a share purchase agreement dated 04
July 2012. Mr. Chung Wing Chin is a member of the board of the Company.
On 04 July 2012, a shareholders’ general meeting of the Company was held during which
resolutions for a change of the Company’s name from “Blitz 12-402 AG” to “Pacific Retail
Merchants AG” and amendments to the Articles of Association were passed.
On 06 December 2012 an extraordinary shareholders’ general meeting of the Company was held
and its registered share capital was increased from EUR 50,000 to EUR 6,403,007 (notarial deed,
Roll of Deed Number 2410W06.12.12 of the notary public Dr. Wenner, Germany, dated 06.
December 2012). The issuance of the new 6,353,007 no par value ordinary bearer shares with a
proportionate value of EUR 1.00 was effected against a contribution in kind under a share
contribution agreement (Einbringungsvertrag). The shareholders’ general meeting has declared its
consent to the share contribution agreement according to Section 52 German Stock Corporation
Act (Aktiengesetz). Pursuant to this share contribution agreement, Giant Luxury Ltd. (BVI)
contributed all shares in Giant Luxury Holdings Limited to the Company’s registered capital. Giant
Luxury Ltd. (BVI) subscribed for 100% of the newly issued shares of the Company. Giant Luxury
Ltd. (BVI) subscribed for 6,353,007 new shares against the contribution of 5,300,000 shares in
Giant Luxury Holdings Limited. Upon effectiveness of the increase of the Company’s registered
share capital, Giant Luxury Ltd. (BVI) held 6,353,007 shares, representing 99.20% of the share
capital of the Company and Mr. Chung Wing Chin held 50,000 shares, representing 0.80% of the
share capital of the Company.
On _______, the shareholders in Giant Luxury Ltd. (BVI) passed a shareholders’ resolution to
distribute the new shares subscribed by Giant Luxury Ltd. to the shareholders by way of a dividend
distribution. Following the dividend distribution, the shareholding in the Company is as follows:
Name of shareholder in Giant Luxury Ltd. (BVI)
Chung Wing Chin
Number of shares distributed and allocated
1,290,559
Sunever Group Limited
593,505
Wong Man Keung
589,086
Lui Kam Fei
330,848
Lai Zhi Yan
314,432
Yuen Ho Pan
310,643
Alright International Holdings Limited
308,749
121
Wong Siu Lai
303,067
Wong Yim Ling
303,067
Aggressive Resources Limited
212,147
Wong Hon Leong
212,147
Billion Base Investments Ltd.
188,785
Fortune Asia Investment Ltd.
176,789
ZXY Strategies Ltd.
154,690
Orchard Asia Ltd.
154,690
Friedland Global Capital PTE LTD.
159,862
Elegant Investment Strategies Ltd.
109,230
Mastermind Asia Ltd.
106,073
8300 Fasa Ltd.
106,073
Titanium Investment Ltd.
106,073
Sharp Win Ltd.
103,548
Invest Wise Ltd.
64,402
Lafayette 543 Ltd
42,303
Dragon Investment Asia Ltd.
39,146
Longtou Ltd.
39,118
JL Penn Investments LLC
25,256
LHF Holdings LLC
25,256
Hotsun Asia Ltd.
23,361
Mark Lubchenco
5,051
W.R. Valentine LLC
5,051
Total
6,403,007
122
Mr. Wong Wai Keung is the owner and member of the board of Sunever Group Ltd., Following the
distribution of the shares in Company to the shareholders in Giant Luxury Ltd. (BVI) the
shareholding in the Company is as follows:
Name of shareholder in Giant Luxury Ltd. (BVI)
Number of shares
Amount of shares in
per cent
Chung Wing Chin
1,290,559
20.15
Sunever Group Limited
593,505
9.27
Wong Man Keung
589,086
9.20
Lui Kam Fei
330,848
5.17
Lai Zhi Yan
314,432
4.91
Yuen Ho Pan
310,643
4.89
Alright International Holdings Limited
308,749
4.82
Wong Siu Lai
303,067
4.73
Wong Yim Ling
303,067
4.73
Aggressive Resources Limited
212,147
3.31
Wong Hon Leong
212,147
3.31
Billion Base Investments Ltd.
188,785
2.95
Friedland Global Capital PTE LTD.
159,862
2.45
Fortune Asia Investment Ltd.
176,789
2.76
ZXY Strategies Ltd.
154,690
2.42
Orchard Asia Ltd.
154,690
2.42
Elegant Investment Strategies Ltd.
109,230
1.71
Mastermind Asia Ltd.
106,073
1.66
8300 Fasa Ltd.
106,073
1.66
Titanium Investment Asia Ltd.
106,073
1.66
Sharp Win Ltd.
103,548
1.62
Invest Wise Ltd.
64,402
1.01
123
Lafayette 543 Ltd.
42,303
0.66
Dragon Investment Asia Ltd.
39,146
0.61
Longtou Ltd.
39,118
0.61
JL Penn Investments LLC
25,256
0.40
LHF Holdings LLC
25,256
0.40
Hotsun Asia Ltd.
23,361
0.36
Mark Lubchenco
5,051
0.08
W.R. Valentine LLC
5,051
0.08
6,403,007
100.00
Total
Mr. Wong Wai Keung is the owner and member of the board of Sunever Group Ltd., There have
been no changes to the shareholding structure of the Company since.
The company name (Firma) of the Company is “Pacific Retail Merchants AG”. The Company is
registered with the commercial register of the local court of Munich, Germany under registration
number HRB 198381. The Company has its registered business address at Rosenheimer Str. 145e,
81671 Munich, Germany (telephone number: +49 89 809902900. The Company’s fiscal year end is
September 30.
Business Purpose of the Company
The Company engages in business activities outside of Germany. According to Section 2 of the
Company’s Articles of Association (Satzung) the Company has full capacity to carry on or
undertake any business or activity, do any act or enter into any transaction and provides of full
rights, powers and privileges for these purposes. The Company’s principal business is providing of
services in the areas of retail and wholesale as well as consultancy with regard to retail and
wholesale and the marketing of respective amounts. Further, the Company will act as holding
company for local and foreign operative companies.
Currently, the Company acts as holding company for Giant Luxury Holdings Limited.
124
Group Structure and Recent Corporate Restructuring of the PRM
Each entity of the PRM Group is wholly owned by its respective parent entity.
125
The following tables present information concerning the subsidiaries of Giant Luxury Holdings
Limited:
1.
Name
Hing Lung Medicine Company Limited
2.
Place of Incorporation
Hong Kong
3.
HK$ 2,000.00
Ordinary Shares
100%
5.
Issued and fully paid-up share
capital / registered capital
Percentage of equity directly
attributable to the Group
Principal activities
6.
Reserves in EUR
7.
Profit or loss arising out of ordinary
activities, after tax, for the last
financial year
Amount still to be paid up on shares
held
Amount of dividends received
4.
8.
9.
Operating a sino-pharmaceutical ingredients and
medicine retail-shop
116,693.00
65,431.00
0.00
0.00
10. Amount of debts owed to and by the
issuer with regard to the
undertaking
0.00
1.
Name
Dah Sing Bird Nest Store Limited
2.
Place of Incorporation
Hong Kong
3.
HK$ 9,000.00
Ordinary Shares
100%
5.
Issued and fully paid-up share
capital / registered capital
Percentage of equity directly
attributable to the Group
Principal activities
6.
Reserves in EUR
7.
Profit or loss arising out of ordinary
activities, after tax, for the last
financial year
Amount still to be paid up on shares
held
Amount of dividends received
4.
8.
9.
10. Amount of debts owed to and by the
issuer with regard to the
undertaking
Operating a sino-pharmaceutical ingredients and
medicine retail-shop
1,092,920.00
786,466.00
0.00
0.00
0.00
126
Name
Universal Medicine Company Limited
2.
Place of Incorporation
Hong Kong
3.
HK$ 2,500.00
Ordinary Shares
100%
5.
Issued and fully paid-up share
capital / registered capital
Percentage of equity directly
attributable to the Group
Principal activities
6.
Reserves in EUR
7.
Profit or loss arising out of ordinary
activities, after tax, for the last
financial year
Amount still to be paid up on shares
held
Amount of dividends received
1.
4.
8.
9.
10. Amount of debts owed to and by the
issuer with regard to the
undertaking
Operating a sino-pharmaceutical ingredients and
medicine retail-shop
129,565.00
(42,429.00)
0.00
0.00
0.00
Name
Yue York Medicine Group Limited
2.
Place of Incorporation
Hong Kong
3.
HK$ 2,000.00
Ordinary Shares
100%
5.
Issued and fully paid-up share
capital / registered capital
Percentage of equity directly
attributable to the Group
Principal activities
6.
Reserves in EUR
7.
Profit or loss arising out of ordinary
activities, after tax, for the last
financial year
Amount still to be paid up on shares
held
Amount of dividends received
1.
4.
8.
9.
10. Amount of debts owed to and by the
issuer with regard to the
undertaking
Operating a sino-pharmaceutical ingredients and
medicine retail-shop
39,991.00
40,178.00
0.00
0.00
0.00
127
1.
Name
Giant King Medicine Limited
2.
Place of Incorporation
Hong Kong
3.
HK$ 1.00
Ordinary Shares
100%
5.
Issued and fully paid-up share
capital / registered capital
Percentage of equity directly
attributable to the Group
Principal activities
6.
Reserves in EUR
7.
Profit or loss arising out of ordinary
activities, after tax, for the last
financial year
Amount still to be paid up on shares
held
Amount of dividends received
4.
8.
9.
10. Amount of debts owed to and by the
issuer with regard to the
undertaking
Operating a sino-pharmaceutical ingredients and
medicine retail-shop
93,285.00
78,334.00
0.00
0.00
0.00
1.
Name
Giant Royal Medicine Limited
2.
Place of Incorporation
Hong Kong
3.
HK$ 1.00
Ordinary Shares
100%
5.
Issued and fully paid-up share
capital / registered capital
Percentage of equity directly
attributable to the Group
Principal activities
6.
Reserves in EUR
7.
Profit or loss arising out of ordinary
activities, after tax, for the last
financial year
Amount still to be paid up on shares
held
Amount of dividends received
4.
8.
9.
10. Amount of debts owed to and by the
issuer with regard to the
undertaking
Operating a sino-pharmaceutical ingredients and
medicine retail-shop
93,285.00
78,334.00
0.00
0.00
0.00
128
1.
Name
Giant Top Medicine Limited
2.
Place of Incorporation
Hong Kong
3.
HK$ 1.00
Ordinary Shares
100%
5.
Issued and fully paid-up share
capital / registered capital
Percentage of equity directly
attributable to the Group
Principal activities
6.
Reserves in EUR
7.
Profit or loss arising out of ordinary
activities, after tax, for the last
financial year
Amount still to be paid up on shares
held
Amount of dividends received
4.
8.
9.
Operating a sino-pharmaceutical ingredients and
medicine retail-shop
143,479.00
54,514.00
0.00
0.00
10. Amount of debts owed to and by the
issuer with regard to the
undertaking
0.00
1.
Name
Giant Ocean Medicine Limited
2.
Place of Incorporation
Hong Kong
3.
HK$ 1.00
Ordinary Shares
100%
5.
Issued and fully paid-up share
capital / registered capital
Percentage of equity directly
attributable to the Group
Principal activities
6.
Reserves in EUR
7.
Profit or loss arising out of ordinary
activities, after tax, for the last
financial year
Amount still to be paid up on shares
held
Amount of dividends received
4.
8.
9.
10. Amount of debts owed to and by the
issuer with regard to the
undertaking
Operating a sino-pharmaceutical ingredients and
medicine retail-shop
71,529.00
9,015.00
0.00
0.00
0.00
Name
Giant Channel Medicine Limited
Place of Incorporation
Hong Kong
1.
2.
129
3.
5.
Issued and fully paid-up share
capital / registered capital
Percentage of equity directly
attributable to the Group
Principal activities
6.
Reserves in EUR
7.
Profit or loss arising out of ordinary
activities, after tax, for the last
financial year
Amount still to be paid up on shares
held
Amount of dividends received
4.
8.
9.
10. Amount of debts owed to and by the
issuer with regard to the
undertaking
HK$ 1.00
Ordinary Shares
100%
Operating a sino-pharmaceutical ingredients and
medicine retail-shop
746.00
28,759.00
0.00
0.00
0.00
Name
Giant Emperor Medicine Limited
2.
Place of Incorporation
Hong Kong
3.
HK$ 1.00
Ordinary Shares
100%
5.
Issued and fully paid-up share
capital / registered capital
Percentage of equity directly
attributable to the Group
Principal activities
6.
Reserves in EUR
7.
Profit of loss arising out of ordinary
activities, after tax, for the last
financial year
Amount still to be paid up on shares
held
Amount of dividends received
1.
4.
8.
9.
10. Amount of debts owed to and by the
issuer with regard to the
undertaking
Operating a sino-pharmaceutical ingredients and
medicine retail-shop
4,927.00
449.00
0.00
0.00
0.00
Name
Giant Dragon (China) Limited
2.
Place of Incorporation
Hong Kong
3.
Issued and fully paid-up share
capital / registered capital
HK$ 1.00
Ordinary Shares
1.
130
4.
5.
Percentage of equity directly
attributable to the Group
Principal activities
6.
Reserves in EUR
7.
Profit or loss arising out of ordinary
activities, after tax, for the last
financial year
Amount still to be paid up on shares
held
Amount of dividends received
8.
9.
100%
Operating a sino-pharmaceutical ingredients and
medicine retail-shop
26,337.00
19,155.00
0.00
0.00
10. Amount of debts owed to and by the
issuer with regard to the
undertaking
0.00
1.
Name
GL IIXXII Limited
2.
Place of Incorporation
Hong Kong
3.
HK$ 1.00
Ordinary Shares
100%
5.
Issued and fully paid-up share
capital / registered capital
Percentage of equity directly
attributable to the Group
Principal activities
6.
Reserves in EUR
7.
Profit or loss arising out of ordinary
activities, after tax, for the last
financial year
Amount still to be paid up on shares
held
Amount of dividends received
4.
8.
9.
Operating a sino-pharmaceutical ingredients and
medicine retail-shop
3,357.00
10. Amount of debts owed to and by the
issuer with regard to the
undertaking
3,357.00
0.00
0.00
0.00
Pursuant to its Articles of Association (Satzung), notices of the Company will be made in
Notices the German Federal Gazette (Bundesanzeiger). Publications required by stock
exchange laws and regulations will be made in a national journal designated for such
purposes by the Frankfurt Stock Exchange.
Notices related to the approval of the Prospectus or amendments to the Prospectus will be made
pursuant to the provisions of the German Securities Prospectus Act (Wertpapierprospektgesetz)
and will be published in the form intended for Prospectuses, i.e. on the website of PRM with a
printed version available at the office of Pacific Retail Merchants AG.
The paying agent for Germany is VEM Aktienbank AG. The
agent
is
Clearstream
Banking
AG,
Mergenthalerallee 61, 65760 Eschborn, Germany.
Paying and Depositary Agent depository
131
INFORMATION ON THE SHARE CAPITAL OF PRM AND APPLICABLE PROVISIONS
Share Capital
The registered share capital of the Company (eingetragenes Grundkapital) amounts to EUR
6,403,007.00 and is divided into 6,403,007 no par value ordinary bearer shares
(Inhaberstückaktien). All shares are fully paid in and are of the same class, namely no par value
ordinary bearer shares.
Each share in the Company confers upon a shareholder (i) the right to one vote at a meeting of the
shareholders, (ii) the right to an equal share in any dividend paid by the Company and (iii) the right
to an equal share in the distribution of the surplus assets of the Company upon its liquidation. The
shares carry full dividend entitlement for the entire financial year 2012 and all subsequent financial
years. In the event that the Company is dissolved, the Company’s assets remaining after
settlement of its liabilities will be distributed among the shareholders in proportion of their
participation.
The management board determines the form of the share certificates as well as the dividend
coupons and renewal coupons. Global share certificates may be issued.
The Company’s current share capital will be represented by a global share certificate without
dividend coupons, which will be deposited with Clearstream Banking AG, Mergenthalerallee 61,
65760 Eschborn, Germany.
General Provisions Relating to the Liquidation of the Company
Apart from liquidation as a result of insolvency proceedings and other reasons as set forth in the
German Stock Corporation Act, the Company may be liquidated only upon resolution of the
shareholders’ general meeting (Hauptversammlung) to be adopted with a statutory majority of at
least 75% of the share capital represented at the shareholders’ general meeting at which such
resolution is adopted. In such a case, the assets remaining following fulfillment of all of the
Company’s liabilities will be distributed among the shareholders according to their respective
shares in the share capital and in accordance with the German Stock Corporation Act.
General Provisions Governing Changes in Share Capital
Under the German Stock Corporation Act, the share capital of a German stock corporation may be
increased against contributions (Kapitalerhöhungen gegen Einlagen) on the basis of a resolution by
the shareholders’ general meeting passed with a majority of at least three-quarters of the share
capital represented at the time the resolution is adopted. Each shareholder generally has preemptive rights (Bezugsrechte), which may be excluded in certain circumstances (see: “Information
on Share Capital of PRM and Applicable Provisions – General Provisions Relating to Pre-Emptive
Rights (Subscription Rights)”).
In addition to the capital increase against contributions, the shareholders may also resolve to
create authorized capital (genehmigtes Kapital) or contingent capital (bedingtes Kapital). In the
case of authorized capital, the management board is authorized, upon the approval of the
supervisory board to increase the share capital once or several times up to an amount of not more
than 50% of the issued share capital at the time the authorization is granted against contributions in
cash by issuing new shares within a period of no more than five years. The shareholders’
resolution creating the authorized capital requires a majority of three-quarters of the share capital
represented at the time the resolution is adopted. The shareholders’ general meeting may also
create contingent capital for the purpose of issuing (i) shares to holders of convertible bonds or
other securities conferring subscription rights on company shares, (ii) shares that serve as
consideration in the event of a merger with another company, or (iii) shares offered to senior
managers and employees. The resolution of approval to be adopted by the shareholders’ general
meeting requires a majority of three-quarters of the share capital represented at the time of the
resolution. The nominal amount of the contingent capital may not exceed 50% of the share capital
or, if the contingent capital is created for the purpose of issuing shares to senior managers and
employees, 10% of the existing share capital at the time the resolution is adopted.
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A resolution to decrease the amount of the share capital requires a majority of three-quarters of the
share capital represented at the time of the resolution.
General Provisions Relating to Pre-Emptive Rights (Subscription Rights)
The German Stock Corporation Act provides that, in the case of a capital increase, shareholders
are entitled by law to subscribe for new shares in accordance with their current equity quota. The
same applies to the issuance of convertible bonds, income bonds, profit participation rights or
bonds with warrants as well as in respect of the sale of treasury shares. Subscription rights are
freely transferable and the Company may determine that the subscription rights may be traded on a
German stock exchange during a fixed period prior to the expiry of the subscription period.
The shareholders’ general meeting may partially or completely exclude the subscription rights by
means of a resolution passed with a majority of at least three-quarters of the share capital
represented at the time the resolution is adopted. Unless all shareholders waive this requirement,
the management board must present a written report to the shareholders’ general meeting
justifying the exclusion of the subscription rights. An exclusion of subscription rights is permissible if
the Company’s interest in excluding the subscription rights outweighs the shareholders’
subscription rights. The Stock Corporation Act allows a capital increase without subscription rights
if such capital increase is made in return for cash contributions, the amount of the capital increase
does not exceed 10% of the existing share capital, and the issue price of the new shares is not
substantially below the current stock exchange price.
Squeeze-Out of Minority Shareholders and Integration
In accordance with the provisions of sections 327a et. seq, of the German Stock Corporation Act
concerning so-called "squeeze-outs" in corporate law, the shareholders of a German stock
corporation may resolve at a shareholders' general meeting at the request of a shareholder holding
at least 95% of the share capital (majority shareholder) to transfer the shares of the other minority
shareholders to the majority shareholder in return for a reasonable cash indemnity. The amount of
the cash indemnity to be granted to the minority shareholders must take into account the
Company's relations on the date the shareholders’ resolution is adopted. The determining factor for
the indemnity amount is the full value of the enterprise, which is normally determined through the
discounted cash-flow method.
Furthermore, sections 319 et seq. of the German Stock Corporation Act provide for the so-called
"integration" (Eingliederung) of German stock corporations. The shareholders of a German stock
corporation may resolve in a shareholders' general meeting to integrate another company if at least
95% of the shares of the Company to be integrated are held by the future principal company. The
withdrawn shareholders of the integrated company are entitled to a reasonable indemnity, which
shall generally be granted in the form of shares in the principal company. The amount of the
indemnity is thereby to be determined through the so-called "merger value ratio" between the two
companies, i.e., the conversion ratio which in the event of a merger of two companies would be
regarded as fair ratio. In contrast to the provisions on the preclusion of minority shareholders,
integration is only possible if the future principal company is a stock corporation domiciled in
Germany.
Reporting and Notification Requirements in Relation to Share Ownerships
According to Section 20 of the German Stock Corporation Act, a shareholder who holds more than
25% in the shares of a company or to whom more than 25% of the shares are attributed, is
required to report the amount of shares held to the Company immediately. The Company must
publish such information in the German Federal Gazette without undue delay. Pursuant to the
German Stock Corporation Act, there are different types of attribution mechanisms for shares to
direct or indirect shareholders. For example, shares held by a company being a subsidiary of a
third company in the meaning of Section 17 German Stock Corporation Act, will be attributed to the
parent company. Equally, shares held by a company holding the shares on behalf of a third
company, are attributed to that third company. If a shareholder does not report the amount of
shares held to the Company pursuant to Section 20 of the German Stock Corporation Act, such
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shareholder is legally barred from exercising its rights in the shares (including the voting rights and
rights of dividend payment) until such shareholder reports its shareholding to the Company.
CORPORATE BODIES AND MANAGEMENT
General
The corporate bodies of the Company are the management board (Vorstand), the supervisory
board (Aufsichtsrat) and the shareholders’ general meeting (Hauptversammlung). The powers of
these governing bodies are determined by the provisions of the German Stock Corporation Act
(Aktiengesetz), the Company’s Articles of Association (Satzung), and the respective by-laws of the
management board and the supervisory board (Geschäftsordnungen für den Vorstand und den
Aufsichtsrat).
The management board conducts the Company’s business in accordance with the relevant
statutes, the Company’s Articles of Association and the management board’s by-laws. It represents
the Company in dealings with third parties.
The management board is responsible for ensuring that appropriate risk management and risk
monitoring systems are in place to provide early warning of any developments that might
jeopardize the Company’s continuing existence. The management board also has an obligation to
report regularly at least on a quarterly basis to the supervisory board on the status of business, in
particular any developments affecting revenues, and on the situation of the Company and its
subsidiaries. In the last supervisory board meeting of each financial year, the management board
must report on business policy and other key issues relating to corporate planning and present the
budget for the following financial year, as well as present its mid-term strategy. The management
board is also required to report to the supervisory board in a timely manner on any transactions
that may be significant with respect to the Company’s profitability or liquidity, in order to give the
supervisory board the opportunity to express its opinion on such transactions prior to their
implementation. The management board must further report any important matters to the chairman
of the supervisory board, including any matter involving subsidiaries and/or affiliates that could
have a material effect on the Company’s position. A member of the management board may not
serve as a member of the supervisory board simultaneously.
The supervisory board appoints the members of the management board and is only entitled to
dismiss them for good cause. The supervisory board advises the management board on managing
the Company and supervises its management activities. Pursuant to the German Stock
Corporation Act, the supervisory board may not engage in management activities. However, the
Articles of Association or the management board’s respective by-laws must stipulate that the
management board must obtain the supervisory board’s prior approval for certain transactions.
Members of the management board and supervisory board owe a duty of care and loyalty to the
Company. In all their actions, members of these governing bodies must consider a wide number of
interests, including those of the Company, its shareholders, its employees and its creditors. The
management board must also take into consideration the right of shareholders to equal treatment
and equal information. Should members of the management or supervisory boards breach these
duties, they are jointly and severally liable to the Company for compensation.
Under currently applicable German law, a shareholder has no possibility of taking direct action
against members of the management board or the supervisory board if such shareholder deems
that they have breached their fiduciary duties and that, as a result, the Company has suffered
damages. Under normal circumstances only the Company itself is entitled to claim compensatory
damages against members of the management board or the supervisory board. The Company will
be represented by the management board in case of claims against members of the supervisory
board and by the supervisory board in case of claims against members of the management board.
Based on a decision of the German Supreme Court, if there is a likelihood that the Company has a
claim against a member of the management board, the supervisory board must pursue this claim
unless it is in the Company’s interest not to pursue it.
If the respective governing body entitled to represent the Company decides not to pursue a claim,
the German Stock Corporation Act requires that claims for compensatory damages of the
Company must be enforced against members of governing bodies if the shareholders’ general
meeting so resolves with a simple majority. Shareholders whose aggregate shareholdings equal or
134
exceed 10% of the share capital or a notional value of the share capital of EUR ______ may
request that a representative be appointed to enforce claims for compensatory damages.
Moreover, shareholders whose aggregate shareholdings at the time of the request equal or exceed
1% of the share capital or a notional value of the share capital of EUR _______ may request in
their own name that a law suit be admitted before the Regional Court (Landgericht) at the
Company’s registered domicile for enforcement of claims for compensation brought by the
Company. Among other things, it is a precondition for admission of the action that the shareholders
of the Company have unsuccessfully requested to bring an action after having set an appropriate
deadline, and that facts exist that justify the suspicion that the Company has incurred damages due
to impropriety or gross violation of the law or the Company’s Articles of Association. The Company
is entitled at any time to enforce its claim for compensatory damages itself. The bringing of an
action by the Company makes a pending approval procedure or action by the shareholders
inadmissible.
The Company may not waive or settle any such claim until three years have elapsed since the
vesting of such claims, and then only if the shareholders’ general meeting so resolves by simple
majority, provided further that no minority of shareholders, holding in the aggregate 10% or more of
the registered share capital, raises a written objection in the minutes of the meeting.
Under German law, neither a shareholder nor any other individual may attempt to influence
members of the management or supervisory boards to act in a manner that would harm the
Company. Shareholders who have a majority shareholding in the Company may not use their
influence to the disadvantage of the Company, unless such disadvantage is compensated. Any
person who uses its influence to cause a member of the management or supervisory board, a
commercial attorney in fact (Prokurist) or any person holding a commercial power of attorney to act
in a manner that harms the Company or its shareholders may be obliged to compensate the
Company and its shareholders for the resulting damage. In addition, the members of the respective
supervisory and management boards may be jointly and severally liable for breach of their duties.
Management Board
General Provisions on the Management Board
The supervisory board determines the size of the management board. The supervisory board may
appoint one management board member as chairman or spokesman and another member as
deputy chairman or spokesman. Moreover, the supervisory board may appoint further members of
the management board.
Members of the management board are appointed by the supervisory board for a maximum term of
five years. Reappointment or extension of the term, for a maximum of five years in each case, is
permissible upon a resolution of the supervisory board that may be adopted not earlier than one
year prior to the expiration of the current term of office. The supervisory board may revoke the
appointment of a management board member prior to the expiration of its term for good cause,
such as for gross breach of fiduciary duties or if the shareholders’ general meeting adopts a nonconfidence resolution in relation to the management board member in question.
The supervisory board, or, if the supervisory board has not done so, the management board, with
the approval of the supervisory board, may issue by-laws for the management board. For specific
types of transactions of the Company or controlled and affiliated companies, in particular
transactions that fundamentally change the Company’s earnings prospects or its risk exposure, the
respective by-laws must specify that such transactions require the prior consent of the supervisory
board.
By-laws for the management board and for the supervisory board of the Company were adopted by
a resolution of the supervisory board on _________. According to the by-laws, certain transactions
(e.g. capital expenditure projects above a specific amount, the acquisition and disposal of
companies and of real property above a specific amount) require the prior consent of the
supervisory board.
According to its Articles of Association, the Company is legally represented by the members of the
management board acting jointly or by one member of the management board acting jointly with
one commercial attorney in fact (Prokurist). If only one person is appointed to the management
board, that person is entitled to represent the Company solely. The supervisory board can grant
sole power of representation to individual members or to all members of the management board
135
and exempt individual members or all members of the management board from the prohibition
against multiple representations (Section 181, second alternative, German Civil Code), Section 112
of the German Stock Corporation Act (Aktiengesetz) not being affected. The supervisory board has
granted all members of the management board exemption from the restrictions of Section 181,
second alternative, of the German Civil Code by means of a resolution dated 04 July 2012. The
resolutions of the management board are adopted by a simple majority of its members unless other
majorities are prescribed by law, the Company’s Articles of Association or the management board’s
respective by-laws.
The Members of the Company’s Management Board
The management board of the Company currently comprises 3 members. The current members
of the Company’s management board are Mr. Wong Wai Keung, Mr. Chung Wing Chin and Ms.
Yeung Fung Lin. They have been appointed by resolutions of the Company’s supervisory board
of 07 July 2012 for a term of 5 years.
The following table sets lays out further information on the members of the Company’s
management board:
Information about Members of the Management Board:
Name
Age Appointed on
Wong Wai Keung
43
Term expires on
Responsibility
04 July 2012
03 July 2017
04 July 2012
Chung Wing Chin
41
Yeung Fung Lin
37
04 July 2012
CEO - President
COO, Operations,
03 July 2017 Marketing and
Sales
03 July 2017
CFO, Treasurer,
Finance
Mr. Wong Wai Keung
Mr. Wong has owned, operated and successfully grown specialty retail shops for more than twenty
years. His contacts and expertise regarding Hong Kong's dried seafood and Chinese herbal
medicine market have played an instrumental role in enabling the company to achieve its
expansion goals to date by implementing a growth strategy that focuses on maximizing outcomes
to obtain market success.
Mr. Chung Wing Chin
Mr. Chung has over twenty-five years of operational expertise in the field of specialty retail shops.
With a deep knowledge of Chinese herbal medicines as well as a network of suppliers and
pharmacies that he has developed throughout the years, his relationships in the market are long
term and extensive. He is responsible for managing the Company's inventory while focusing
specifically on the procurement of Chinese herbal medicines and health-care products.
Ms. Yeung Fung Lin
Ms. Yeung graduated from Hong Kong Polytechnic University with a bachelor degree in languages
and business in 1997. She also obtained a masters degree in marketing from the Hong Kong
Chinese University in 2007. Ms. Yeung has over fifteen years' experience in sales and marketing
development for multinational corporations. She was previously Head of Sales-Asia Pacific for
Avery Dennison, a Fortune 500 company, and Sales and Marketing Director for CCT Telecom
Group. Her expertise in strategic planning, business development and brand management has
been proven by her solid track record and significant achievements in different industries. She
leads the Company's efforts in its overall operation on policy making and implementation, strategic
planning, sales and marketing as well as corporate communications. She also focuses on brand
management and human resource development, which are becoming increasing important to the
Company.
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Shareholding and Options
Each of the members of the management team owns stock in the Company, either directly or
indirectly. Mr. Chung Wing Chin holds 1,340,559 shares (20.94%), and Ms. Yeung Fung Lin owns
109,230 shares (1.71%) in the Company. Mr. Wong Wai Keung is the owner and a board member
of Sunever Group Ltd., which owns 593,505 shares, (9.34%) of the Company.
Conflicts of Interest
Neither the members of the management board nor the members of the supervisory board do have
potential conflicts of interests between any of their duties to the Company and their private interests
or other activities. Neither of the members of the management nor the members of the supervisory
board are related.
Compensation of Management Board Members
The members of the management team are compensated as follows: Mr. Wong Wai Keung HK$
1,440,000.00, Mr. Chung Wing Chin HK$ 1,200,000.00 and Ms. Yeung Fung Lin HK$1,000,000.00.
Compensation in Case of Termination of Office
The employment agreements of the members of the Management Board do not provide for
performance-related or other variable salary components or benefits upon termination of office or
employment
Over the last five years,
member of the
Company’s
administrative or management bodies, in particular, no member of the management board:
Certain Information on the Members of the Management Board no

was convicted in relation to fraudulent offences;

was, in the capacity as member of administrative, management or supervisory bodies,
founder or member of senior management of other companies or as partner with unlimited
liability of a limited partnership with a share capital, affected by any bankruptcies,
receiverships or liquidations of any such company or partnership;

was publicly incriminated and/or sanctioned by statutory or regulatory authorities (including
designated professional bodies);

has been disqualified by a court from acting as a member of the administrative,
management or supervisory bodies of an issuer or from acting in the management or
conduct of the affairs of any issuer.
The Company has not granted sureties or loans to members of the management board nor has it
assumed any guarantees for them. Except as otherwise stated in the chapter “Related Party
Transactions” in this Prospectus, no members of the management board have been or are
presently involved in any business activities outside the Company, or in any other Company
transaction of unusual type or nature.
Members of the management board may be contacted at the Company’s business address at 14/F,
No. 80 Gloucester Road, Wanchai, Hong Kong.
Supervisory Board
General Provisions on the Supervisory Board
Pursuant to the Company’s Articles of Association and Sections 95 and 96 of the German Stock
Corporation Act (Aktiengesetz), the supervisory board is composed of three members who are
appointed by the shareholders’ general meeting. The term of a supervisory board member may
only run until the annual shareholders’ general meeting which formally approves the actions of the
supervisory board members for the fourth financial year following commencement of the member’s
term of office, not including the financial year in which the term commences. Supervisory board
members may be re-elected.
Any supervisory board member may be removed by means of a resolution of the shareholders’
general meeting with a simple majority of the votes cast. Moreover, according to the Articles of
Association, any supervisory board member as well as any substitute member (Ersatzmitglied) may
137
resign for any reason by serving at least one month’s prior written notice to the chairman of the
supervisory board and to the management board.
When electing a member of the supervisory board, the shareholders’ general meeting may
simultaneously elect substitute members who become members of the supervisory board if the
appointed member’s office for any reason terminates before the end of its term of appointment. The
supervisory board appoints a chairman and a deputy chairman from among its members. The
chairman or, if the chairman is unable to attend, the deputy chairman, is obliged to convene and
conduct the meetings of the supervisory board.
The Members of the Company’s Supervisory Board
By means of the deed of incorporation (Gründungsurkunde) the founders of the Company elected
the following persons as members of the first supervisory board:

Mrs. Katja Gogalla

Mrs. Randi Mette Selnes

Mrs. Wilhelmine Bichlmaier
All above mentioned members of the supervisory board resigned from office on 04 July 2012 and
have been withdrawn from their office for reasons of precaution by the extra-ordinary shareholders’
general meeting held on the same day. The said shareholders’ general meeting elected the
following individuals as members of the Company’s supervisory board:
Mrs. Antje Trischberger was elected chairman and Mr. Edwin Kai Ip Li was elected vice-chairman
of the supervisory board.
On 03 September 2012the shareholders’ general meeting withdrew Mrs. Trischberger from office
and elected Mr. Kai Kuan as new member of the supervisory board. He was also elected chairman.
The table below shows the current members of the supervisory board and their respective terms of
office:
Name
Kai Kuan
Edwin Kai Ip Li
Fred Altberger
Age
Appointed in
47
51
65
Term expires on
2012
2012
2012
2017
2017
2017
In 2017, the respective term of office expires after the shareholders’ general meeting that formally
approves the actions of the members of the supervisory board of the financial year 2016, however,
regardless of such approval, in any event not later than 31 August 2017.
SUPERVISORY BOARD
Kai Kuan
Mr. Kuan has more than 20 years’ experience in management and consultancy roles in
infrastructure and technology since 1990. His focus is international development and finance. Prior
to establishing Sustainomics in 2001, Mr. Kuan worked for Andersen, Instead and Siemens where
he developed and ran a technology joint venture in China before moving to the financial services
division to oversee project development/finance and risk management. Mr. Kuan studied
economics and business in Germany, England, France, and China.
Edwin Kai Ip Li
Mr. Li has been involved in the financial industry since 1986, initially as vice president of Great
American Finance where he was responsible for helping public and private companies in the U.S.,
Hong Kong and China achieve their financing and growth objectives. Following that Mr. Li formed
Anxian Consulting and Strategies Inc. to assist Asian companies locate investors and secure stock
market listings. Mr. Li continues to serve as an advisor for a number of companies in Hong Kong
and the PRC..
Fred Altberger
Mr. Altberger is a U.S. Certified Public Accountant (CPA) with over forty years of experience in the
financial services industry. He has been a partner in a CPA firm, acted as a chief financial officer
138
for private enterprises, and was a partner and CFO of a NASD broker/dealer. He was a partner in
ProTrade, a securities trading firm that was created for individual investors and eventually became
part of RBS. Over the last 10 years he has done extensive financial consulting with companies in
various stages of business development and acted as the CFO of some of them.
Certain Information on the Members of the Supervisory Board
Over the last five years, no member of the Company’s administrative or management bodies, in
particular, no member of the supervisory board:

was convicted in relation to fraudulent offences;

was, in the capacity as member of administrative, management or supervisory bodies,
founder or member of senior management of other companies or as partner with unlimited
liability of a limited partnership with a share capital, affected by any bankruptcies,
receiverships or liquidations of any such company or partnership;

was publicly incriminated and/or sanctioned by statutory or regulatory authorities (including
designated professional bodies);

has been disqualified by a court from acting as a member of the administrative,
management or supervisory bodies of an issuer or from acting in the management or
conduct of the affairs of any issuer.
The Company has not granted sureties or loans to members of the supervisory board nor has it
assumed any guarantees for them. Except as otherwise stated in the chapter “Related Party
Transactions” in this Prospectus, no members of the supervisory board have been or are presently
involved in any business activities outside the Company, or in any other Company transaction of
unusual type or nature.
Members of the supervisory board may be contacted at the Company’s business address at 14/F,
No. 80 Gloucester Road, Wanchai, Hong Kong and Rosenheimer Str. 145e, 81761 Munich,
Germany.
Supervisory Board Compensation
Regular
Member
Financial
Expert
Chairman
Annual Base Upon Listing since 01 January 2013
EUR
8.750,00
EUR
13.125,00
EUR
17.500,00
Per Diem - Shareholder & Supervisory Board Physical
Meetings (travel expenses not included)
EUR
1.000,00
EUR
1.000,00
EUR
1.000,00
There has been no compensation of the members of the supervisory board in previous years.
Shareholders’ General Meeting
A shareholders’ general meeting may be held at the Company’s registered office, at the seat of a
German stock exchange or in a town with more than 250,000 inhabitants. The shareholders'
general meeting must be called at least 30 days prior to the day until the end of which the
shareholders must register for the shareholders' general meeting. The day of the calling is not
counted for the calculation of the above term. Only shareholders of the Company that have
registered for the shareholders' general meeting in due time and have proven their eligibility to
attend are entitled to attend and exercise their voting right at the shareholders’ general meeting.
The eligibility of shareholders for participating in the shareholders’ general meeting is documented
by a certification of their shareholding prepared in text format by the depository institution (Section
126b German Civil Code) in German or English and referring to the start of the 21st day before the
day of the shareholders’ general meeting. The registration and the certification must be received at
139
the place announced in the invitation at the Company's registered offices no later than six days
before the day of the shareholders’ general meeting. The day of the shareholders’ general meeting
and the day of receipt are not counted for the calculation of the above term. Each share grants the
right to one vote. A voting right may be exercised by a proxy.
Unless provided otherwise by the Company’s Articles of Association or applicable laws and
regulations, the resolutions of the shareholders’ general meeting are adopted by a simple majority
of the votes cast and, insofar as the law requires a majority of the share capital as well as a voting
majority, by a simple majority of the share capital represented at the time the resolution is adopted.
According to the German Stock Corporation Act, certain resolutions of fundamental importance
require a vote of no less than three-quarters of the registered capital represented at the meeting.
Such resolutions include:

amendments to the Company’s Articles of Association;

capital increases;

capital reductions;

the creation or amendment of authorized or contingent capital;

the transfer of the Company’s entire assets and any reorganizations as set forth in the
German Transformation Act (Umwandlungsgesetz) such as mergers (Verschmelzungen),
spin-offs (Spaltungen), transfer of the Company’s assets (Vermögensübertragungen) and
type-changing transformations (Formwechsel);

the conclusion of agreements establishing contractual corporate groups (such as
domination and profit-and-loss-transfer agreements); and

the dissolution of the Company.
The Company’s Articles of Association stipulate in Section 19 para. 1 that, unless otherwise
mandatorily required by law, resolutions are taken by a simple majority of votes and, if a majority of
capital is required, by a simple majority of capital present at the meeting.
The convening of a shareholders’ general meeting can be initiated by the management board, the
supervisory board or, under certain circumstances, by shareholders holding an aggregate of 5% of
the registered share capital. The supervisory board must call a shareholders’ general meeting
whenever the interests of the Company require such a meeting. The shareholders’ general meeting
must be held during the first eight months of each financial year.
Corporate Governance Code Declaration
The German Corporate Governance Code in its current version of 15 May 2012 (the “Code”)
contains recommendations and suggestions for managing and supervising German companies
listed on a stock exchange. As the Code is does apply to companies listed in the Regulated Market
of the Frankfurt Stock Exchange, the Company will follow the recommendations and suggestions of
the Code. The Company will publish an annual declaration pursuant to section 161 of the German
Stock Corporation Act that it follows and will follow the recommendations of the Code or which of
the recommendations were or will not be followed.
RELATED PARTY TRANSACTIONS
General
Related parties to the Company include members of the Company’s management board and their
close family members and companies over which members of the management board of the
Company or their family members could exercise considerable influence or hold a substantial
amount of the voting rights.
In addition, related parties include companies which are consolidated within the Company or in
which the Company holds an investment, which enables the Company to exercise considerable
140
influence over the business policies of the Company in which it holds such investment, as well as
the major shareholders of the Company, including their affiliates.
141
Transactions with related parties
Sales of goods to a related party
Interest income received from a director
1)
2)
01.10.2011
to
30.06.2012
EUR
01.10.2010
to
30.09.2011
EUR
01.10.2009
to
30.09.2010
EUR
4,370
83,907
-
32,369
-
01.10.2008
to
30.09.2009
EUR
-
1) Sales of goods to a related party, which is controlled by the member of the board of the
Company, Mr. Chung Wing Chin, were transacted at the current market value in the normal
course of business.
2) Interest income was charged on the loan to a director at the interest rate equal to mortgage
loan of 3% per annum
Balance with related parties
Representing:
Amount due to a former shareholder of a
subsidiary
Amount due to a director
Total:
3)
4)
30.06.2012
EUR
30.09.2011
EUR
30.09.2010
EUR
30.09.2009
EUR
1,052,580
763,310
28,401
552,981
531,860
1,052,580
763,310
581,382
531,860
3) At 30 September 2010, amount due to a former shareholder of a subsidiary represented the
temporary advances from Mr. Wong Hon Leong, a former shareholder of Universal Medicine
Company Limited, which is interest-free, unsecured and repayable on demand.
4) At 30 June 2012, 30 September 2011, 2010 and 2009, amount due to a director represented
the temporary advances from Mr. Chung Wing Chin, a member of the board of the
Company, which is interest-free, unsecured and has no fixed term of repayment.
Loan to a director
30.06.2012
EUR
30.09.2011
EUR
30.09.2010
EUR
30.09.2009
EUR
Loan to a director
Less: current-portion
608,210
(22,915)
-
-
-
Non–current portion
585,295
-
-
-
The loan to a director carries interest at 3% per annum, unsecured and is repayable by
monthly installment due in March 2032.
Bank loan guarantees
At the date of this Prospectus, bank loans carrying interest at rates ranging from 3% to 6.5% per
annum and were guaranteed by Mr. Wong Wai Keung, a director of subsidiaries, and Mr. Chung
Wing Chin, a member of the board of the Company and Ms. Ma Fong, the spouse of Mr. Chung. All
the bank borrowings were secured by the properties owned by Mr. Wong Wai Keung, Mr. Chung
Wing Chin and Ms. Ma Fong. The loans were originated during the period ending 30 June 2012
and have a balance as of 30 June 2012 of EUR 1,771,386.
142
TAXATION IN GERMANY
The following section describes certain material German tax principles that may become relevant
when acquiring, holding or transferring shares. This section is not a comprehensive or complete
description of all German tax aspects that may be relevant for shareholders. It is based on the
German tax laws applicable as of the date of this Prospectus and on the provisions of double
taxation conventions entered into between Germany and other countries as of this date. In both
areas the law may change, possibly also with retroactive effect.
Potential purchasers of the Company’s shares should consult their tax advisors with respect to the
tax consequences of acquiring, holding and transferring shares and with respect to the procedure
to be complied with to obtain a refund of German withholding tax (Kapitalertragsteuer) paid. The
specific tax situation of each shareholder can only be addressed adequately by means of individual
tax advice.
Taxation of the Company
In Germany, corporations are generally subject to corporate income tax at a rate of 15% plus a
5.5% solidarity surcharge (Solidaritätszuschlag) thereon (in total 15.825%). In addition, German
corporations are subject to trade tax (Gewerbesteuer) with their income from permanent
establishments in Germany subject to certain adjustments for trade tax purposes, the trade taxable
income (Gewerbeertrag). The trade tax depends on the municipalities in which the corporation
maintains permanent establishments. As a general rule, the effective trade tax rate varies between
7% and 20% of the trade taxable income depending in each case on the trade tax rate of the
relevant municipality. The trade tax rate in Munich currently amounts to 17,15 % (the current
municipal trade tax assessment rate (Gewerbesteuerhebesatz) amounts to 490 % for Munich).
Interest expenses within companies of the same group are only deductible in the event the
Company is in compliance with the so-called interest barrier (Zinsschranke). The interest barrier
restricts the deductibility of interest expenses exceeding the interest income to 30% of the earnings
before interest, taxes, depreciation and amortization (“EBITDA”) determined for tax purposes for
corporate income tax and trade tax purposes. The non-deductible part of the interest expenses can
be carried forward to future fiscal years and might reduce the taxable profit of the Company in the
future if the interest expenses in such period are deductible under the interest barrier. There is a
risk that the non-deductible part of interest expenses might be forfeited, for example in case of
restructuring or closure of the business. The interest barrier will not apply if the interest expenses
exceeding the interest income are less than EUR 3 million or in the event the Company complies
with the so-called “escape clause”, provided there is no harmful shareholder debt financing. The
escape clause stipulates the complete deductibility of interest expenses in the event that the
Company’s equity ratio is not more than 2% lower than that of PRM. For this purpose the equity
ratios of the financial statements at the end of the preceding business year are relevant. Only in
case that there is no harmful shareholder debt financing, the escape clause will be applicable. A
harmful shareholder debt financing is existing if a shareholder (holding directly or indirectly more
than 25% of the shares) or any related party hereto or any third party who has a right of recourse
against the shareholder or a related party hereto receives interest exceeding 10% of the negative
interest balance (difference between interest income and interest expenses) from the respective
corporation or from another affiliated company.
Dividend income that the Company receives from corporations domiciled outside Germany such as
Giant Luxury Holdings Limited and the operative Hong Kong subsidiaries is generally exempt from
corporate income tax. However, 5% of the tax-exempt dividend income is deemed to be a nondeductible business expense for corporate income tax purposes, and as a result is subject to
corporate income tax (plus solidarity surcharge).
Dividend income of the Company derived from its shares in Giant Luxury Holdings Limited and its
Hong Kong subsidiaries will be subject to trade tax. However, such dividend income of the
Company will be exempt from trade tax but for 5%, if specific preconditions are fulfilled (section 9
number. 7 of the German Trade Tax Act,. In general, this trade tax exemption requires that the
Company has continuously held a share of at least 15% of the nominal capital of Giant Luxury
Holdings Limited and its operating Hong Kong subsidiaries since the beginning of the assessment
period and it generates its gross income exclusively or almost exclusively from trade or business
within the meaning of section 8 para. 1 nos. 1 – 6 of the German Foreign Tax Act and from direct
participations, such as the operative Hong Kong subsidiaries, which amount to at least 25% if the
participations are held continuously since at least twelve months prior to the relevant balance sheet
143
date for the assessment of the profits. Furthermore, the trade tax exemption requires proof that (i)
the direct participations are located in the same country as Giant Luxury Holdings Limited and the
direct participations, such as the operative Hong Kong subsidiaries, generate their gross income
exclusively or almost exclusively from trade or business within the meaning of section 8 para. 1
nos. 1 – 6 of the German Foreign Tax Act (so-called Landesholding) or (ii) Giant Luxury Holdings
Limited holds the participations, such as the operative Hong Kong subsidiaries, in connection with
its own activities pursuant to section 8 para. 1 nos. 1 – 6 of the German Foreign Tax Act and the
participations, such as the operative Hong Kong subsidiaries, generate their gross income
exclusively or almost exclusively from trade or business within the meaning of section 8 para. 1
nos. 1 – 6 of the German Foreign Tax Act (so called Funktionsholding).
Nevertheless, dividend income from Giant Luxury Holdings Limited may be exempt from trade tax
upon application by the Company if the Company owns a participation of at least 15% in foreign
subsidiaries, such as the operative Hong Kong subsidiaries, indirectly via Giant Luxury Holdings
Limited, if Giant Luxury Holdings Limited and the foreign subsidiaries distribute their dividends
within the same business year and if the following additional requirements are met: (i) The foreign
subsidiaries, such as Hing Lung Medicine Company Ltd, Universal Medicine Company Ltd, Da
Sing Bird Nest Store Ltd, Yue York Medicine Group Ltd, Giant King Medicine Ltd, Giant Royal
Medicine Ltd, Giant Top Medicine Ltd, Giant Ocean Medicine Ltd, Giant Emperor Medicine Ltd,
Giant Channel Medicine Ltd, Gian Dragon (China), Ltd. and GL IIXII Ltd (together the “Operating
HK Subsidiaries”), exclusively or almost exclusively generate their gross profits from an active
trade or business within the meaning of section 8 para. 1 nos. 1 – 6 of the German Foreign Tax
Act, which exclusively or almost exclusively generate their gross profits from an active trade or
business within the meaning of section 8 para. 1 nos. 1 – 6 of the German Foreign Tax Act and are
located in the same country as Giant Luxury Holdings Limited and (ii) Giant Luxury Holdings
Limited has held at least a participation of 15% in the foreign subsidiaries’ share capital without
interruption since the beginning of the assessment period.
If the trade tax exemption applies, it applies only to the dividends distributed by Giant Luxury
Holdings Limited, which correspond to the indirect participation rate of the Company in the
Operating HK Subsidiaries. If Giant Luxury Holdings Limited realizes other profits than dividends
received by the Operating HK Subsidiaries, the trade tax exemption applies only to the dividends of
Giant Luxury Holdings Limited which correspond to the ratio between the dividends received by the
Operating HK Subsidiaries and all profits of Giant Luxury Holdings Limited. In any case the trade
tax exemption is limited to the amount of the dividends received by the Operating HK Subsidiaries.
In addition, the trade tax exemption requires proof of its requirements. If the requirements of
section 9 number 7 of the German Trade Tax Act are met, 5% of the exempt dividend income is
deemed to be a non-deductible business expense, and as a result, is subject to trade tax.
Corporate income tax losses incurred by the Company in one year may be carried back to the
immediately preceding assessment period up to an amount of EUR 511,500. Any remaining
corporate income losses as well as any trade tax losses may only be offset within certain
restrictions against profits from future years (so-called “minimum taxation”). Up to an amount of
EUR 1 million taxable profits may be offset against existing tax loss carry forwards without
limitation. Taxable profits in excess of EUR 1 million may be offset against existing tax loss carry
forwards for corporate income and trade tax purposes only by 60%. Unused tax loss carry forwards
may be carried forward indefinitely. Tax loss carry forwards and the non-deductible part of the
interest expenses will be forfeited completely in the event that more than 50% of the share capital,
participation rights or voting rights of the Company are directly or indirectly transferred within five
years to one acquirer or a related person hereto or a group of acquirers with same interests or any
comparable circumstances of the case. If more than 25% and up to 50% are transferred, the tax
loss carry forwards and the non-deductible part of the interest expenses will be forfeited
proportionally. A capital increase is equal to a transfer of shares if the shareholding quota has been
changed. As an exception introduced for transfers after 31 December 2009, tax loss carry forwards
and the non-deductible part of the interest expenses may be maintained in the event the
preconditions of the corporate group clause within the meaning of section 8c para. 1 sentence 5 of
the German Corporation Tax Act are fulfilled. As an exception introduced for transfers after 31
December 2009, if more than 25% of shares will be acquired as described above the tax loss carry
forwards will not be forfeited in the amount of hidden reserves available (section 8c para. 1
sentence 6-8 of the German Corporation Tax Act).
Taxation of Shareholders
144
Shareholders are subject to tax in particular in connection with the holding of shares (taxation of
dividends), the disposal of shares (taxation of capital gains) and the gratuitous transfer of shares
(inheritance and gift tax).
Taxation of Dividends
Withholding Tax
Generally, the Company must withhold tax on its dividend distributions at a rate of 25% plus 5.5%
solidarity surcharge thereon (in total 26.37%) and is thus responsible for withholding amounts
corresponding to such taxation at source. Such withholding tax is levied and withheld irrespective
of whether and to what extent the dividend distribution is taxable at the level of the shareholder and
whether the shareholder resides inside or outside Germany. Certain exceptions may apply to
corporations in another EU Member State to which the EU Parent/Subsidiary Directive (90/435/
EEC of 23 July 1990, as amended) applies. A partial exemption may also be available under a
respective double taxation convention. In cases of a full or partial exemption under the EU
Parent/Subsidiary Directive (90/435/ EEC of 23 July 1990, as amended) or a respective double
taxation convention, the restrictive preconditions according to section 50d para. 3 German Income
Tax Act have to be fulfilled. Application forms may be obtained from the German Federal Central
Tax Office (Bundeszentralamt für Steuern), An der Kuppe 1, 53225 Bonn, Germany
(www.bzst.bund.de), as well as from German embassies and consulates.
Dividends to a corporation domiciled outside of Germany are subject to a reduced withholding tax
(irrespective of any double taxation conventions) in the event the shares do not constitute an asset
of a permanent establishment in Germany or an asset for which a permanent representative has
been appointed in Germany. In this case, 2/5 of the withholding tax will be refunded upon
application. The refund requires that the corporation fulfills the preconditions of section 50d para. 3
German Income Tax Act. Refund application forms may be obtained from the German Federal
Central Tax Office (Bundeszentralamt für Steuern), An der Kuppe 1, 53225 Bonn, Germany
(www.bzst.bund.de) as well as from German embassies and consulates. A further reduction or
refund under an applicable double taxation convention is possible. For shareholders resident in
Germany (meaning shareholders whose residence, habitual abode – for legal entities the place of
management, or domicile – is located in Germany) holding their shares as business assets as well
as for shareholders residing outside Germany (foreign shareholders) holding their shares in a
permanent establishment or a fixed base in Germany, or as assets for which a permanent
representative has been appointed in Germany, the tax withheld is credited against the
shareholders’ personal income tax or corporate income tax liability. Any tax withheld in excess of
the shareholders’ personal tax liability is refunded. The same principles apply to the solidarity
surcharge.
Taxation of Dividend Income of Investors Resident in Germany holding their Shares as
Private Assets
For individual shareholders resident in Germany holding their shares as private assets dividends
are subject to the final flat tax (Abgeltungsteuer). Under this regime dividend income of private
investors will be taxed at the principal final flat tax rate of 25% plus a 5.5% solidarity surcharge
thereon (aggregate tax burden: 26.375%) and church tax if applicable. Except for an annual lump
sum allowance (Sparer-Pauschbetrag) of EUR 801 (EUR 1,602 for married couples filing jointly),
private investors will not be entitled to deduct expenses incurred in connection with the capital
investments from their dividend income.
Individual shareholders may opt to the so-called “Teileinkünfteverfahren” in case they own at least
25% of the shares or at least 1% of the shares and work for the company. In this case only 60% of
the dividends will be taxed at their individual tax rate and 60% of the expenses incurred in
connection with the capital investment can be deducted from the dividend income.
If the final flat tax results in a higher tax burden as opposed to the private investor’s individual tax
rate the investor may opt for taxation at his individual tax rate. In case of such an option the final
flat tax will be credited against the individual income tax. Private investors are not entitled to deduct
expenses incurred in connection with the capital investments from their income except of the
annual lump sum allowance even if they opt for taxation at an individual tax rate. This option may
be exercised only for all capital income and married couples may only jointly exercise the option.
145
Taxation of Dividend Income of Investors Resident in Germany holding their Shares as
Business Assets
If shares are held as business assets of a shareholder, the taxation depends on whether the
shareholder is a corporation, a sole proprietor, or a partnership (Mitunternehmerschaft):
Corporations. Dividend distributions to corporate shareholders are generally exempt from
corporate income tax. However, 5% of the tax-exempt dividend income is deemed to be a nondeductible business expense for tax purposes and is therefore subject to corporate income tax
(plus solidarity surcharge) and trade tax. Business expenses actually incurred in connection with
the shares are entirely tax deductible. 95% of dividend income must be added back when
determining the trade taxable income and is therefore subject to trade tax unless the investor holds
at least 15% of the share capital of the Company at the beginning of the relevant assessment
period.
Sole Proprietors. For sole proprietors holding their shares as business assets, generally 60% of
the dividend distributions are taxable. Correspondingly, 60% of the business expenses related to
the dividend income are deductible for tax purposes (subject to any other restrictions on
deductibility). In addition, dividends are entirely subject to trade tax if the shares are held as a
business asset of a permanent establishment in Germany and if the shareholder does not hold at
least 15% of the share capital of the Company at the beginning of the relevant assessment period.
The trade tax levied – depending on the municipal trade tax rate and the individual tax situation – is
partly or entirely credited against the shareholder’s personal income tax liability.
Partnerships. If shares are held by a partnership, personal income tax or corporate income tax is
levied only at the level of the partners. If a partner is subject to corporate income tax, dividends are
generally tax-exempt to 95% (see: “Taxation of Shareholders – Taxation of Dividend Income of
Investors Resident in Germany Holding their Shares as Business Assets – Corporations”). If the
partner is subject to personal income tax, 60% of the dividends are taxable and 60% of the
business expenses related to dividend income are deductible (see: “Taxation of Shareholders –
Taxation of Dividend Income of Investors Resident in Germany Holding their Shares as Business
Assets – Sole Proprietors”). At the level of a partnership, which is liable to trade tax, the entire
dividends are subject to trade tax if the partnership does not hold at least 15% of the share capital
of the Company at the beginning of the relevant assessment period. However, depending on the
applicable municipal trade tax rate and individual circumstances, the trade tax paid at the level of a
partnership may partly or entirely be credited against the personal income tax liability of the
partners if the partners are natural persons.
If the partnership holds 15% of the share capital of the Company at the beginning of the relevant
assessment period, only 5% of the dividends are non-deductible business expenses and therefore
subject to trade tax in the event the partners are corporations or the dividends are trade tax exempt
in the event the partners are individuals.
Taxation of Dividend Income of Investors not Resident in Germany
For foreign shareholders who do not hold their shares in a permanent establishment or a fixed
base in Germany, or as an asset for which a permanent representative has been appointed in
Germany, the German tax liability is, in principle, satisfied upon deduction of a 25% withholding tax
plus a solidarity surcharge of 5.5% (possibly reduced or exempt by way of a refund under a double
taxation convention or if the shareholder is a corporation under the EU Parent/Subsidiary Directive
(90/435/ EEC of 23 July 1990, as amended) or 2/5 of the withholding tax may be refunded in some
cases.) In cases of a full or partial exemption under a respective double taxation convention or
under the EU Parent/Subsidiary Directive (90/435/ EEC of 23 July 1990, as amended) the
restrictive preconditions according to section 50d para. 3 German Income Tax Act have to be
fulfilled.
However, shareholders who hold their shares in a permanent establishment or a fixed base in
Germany, or in business assets for which a permanent representative has been appointed in
Germany, are subject to the same rules described above for shareholders resident in Germany.
146
Taxation of Capital Gains
Taxation of Capital Gains of Investors Resident in Germany holding their shares as Private
Assets
Any gains from the sale or redemption of the shares will be subject to a final flat tax
(Abgeltungsteuer) of 25% plus a solidarity surcharge of 5.5% thereon resulting in an aggregate tax
burden of 26.375%. Except for an annual lump sum allowance (Sparer-Pauschbetrag) of EUR 801
(EUR 1,602 for married couples filing jointly) private investors will not be entitled to deduct
expenses incurred in connection with the capital investments from their capital gain. The annual
lump sum allowance (Sparer-Pauschbetrag) of EUR 801 (EUR 1,602 for married couples filing
jointly) shall be granted annually and includes both dividends and capital gains.
If the final flat tax results in a higher tax burden as opposed to the private investor’s individual tax
rate the investor may opt for taxation at his individual tax rate. If so the final flat tax will be credited
against the individual income tax. Private investors are not entitled to deduct expenses incurred in
connection with the capital investments from their income except for the annual lump sum
allowance even if they opt for taxation at an individual tax rate. This option may only be exercised
for all capital gains and income from capital investments and married couples may only exercise
the option jointly.
Losses from the disposition of the shares may only be offset against other capital gains resulting
from the disposition of shares. Offsetting of overall losses with other income (for example business
or rental income) and other capital income (for example dividends) is not possible. Such losses are
to be carried forward and to be offset against positive capital gains deriving from the sale of shares
in future years. The final flat tax will not apply if the seller of the shares or, in case of gratuitous
transfer, its legal predecessor has held, directly or indirectly, at least 1% of the share capital of the
Company at any time during the five years prior to the disposal. 60% of the capital gains are taxed
upon this disposal.
Capital gains are principally subject to a final flat tax (Abgeltungsteuer) of 25% plus 5.5% solidarity
surcharge thereon (in total 26.375%) in the event a German credit or financial institution (including
a German branch of a foreign credit or financial institution) stores or administrates or carries out the
sale of the shares and pays or credits the capital income. If the shares have not been acquired by
such German credit or financial institution and administered thereafter, for example in case of a
change of administration (Depotwechsel), withholding tax may be levied on 30% of the sale
proceeds.
Taxation of Capital Gains of Investors Resident in Germany holding their Shares as
Business Assets
If shares are held as business assets of a shareholder, the taxation of capital gains realized upon
disposal depends on whether the shareholder is a corporation, a sole proprietor, or a partnership:
Corporations. Capital gains realized by a corporate shareholder upon disposal of shares are
generally exempt from corporate income tax and trade tax. Capital gain for this purpose is the
amount by which the selling price or the equivalent value after deduction of selling costs exceeds
the tax base at the time of disposal. However, 5% of the capital gain is deemed to be a nondeductible business expense and is therefore subject to corporate income and trade tax. Losses
incurred upon the disposal of shares or other impairments of the shares’ value are not tax
deductible. A reduction of profit is also defined as any losses incurred in connection with a loan or
security in the event the loan or the security is granted by a shareholder or by a related person
hereto or by a third person with the right of recourse against the before mentioned persons and the
shareholder holds directly or indirectly 25% or more of the share capital of the Company.
Sole Proprietors. If the shares are held by sole proprietors, 60% of the capital gains realized upon
disposal are taxed. Correspondingly, 60% of the business expenses related to such capital gains
and 60% of any losses incurred upon disposal of shares are tax deductible. In addition, 60% of the
capital gains are subject to trade tax if the sole proprietor is subject to trade tax. However, trade tax
is partly or entirely credited against the shareholder’s personal income tax liability depending on the
applicable municipal trade tax rate and individual circumstances.
Partnerships. If the shareholder is a partnership, taxation depends on whether the partners are
subject to personal income tax or corporate income tax: If the partners are subject to corporate
income tax, any capital gains are generally tax exempt in amount of 95% (see: “Taxation of
147
Shareholders – Taxation of Capital Gains of Investors Resident in Germany Holding their Shares
as Business Assets – Corporations”). If the partners are subject to personal income tax, 60% of the
capital gains are taxable (see: “Taxation of Shareholders – Taxation of Capital Gains of Investors
Resident in Germany Holding their Shares as Business Assets – Sole Proprietors”). For information
on the deductibility of business expenses relating to capital gains and disposal losses for partners
who are subject to corporate income tax see also “Taxation of Shareholders – Taxation of Capital
Gains of Investors Resident in Germany Holding their Shares as Business Assets – Corporations”
and see above “Taxation of Shareholders – Taxation of Capital Gains of Investors Resident in
Germany Holding Their Shares as Business Assets – Sole Proprietors” for information with respect
to partners who are subject to personal income tax. In addition, 60% of the capital gains are subject
to trade tax at the level of a partnership if the partnership is liable to trade tax and the partners are
individuals and 5% of the capital gains are subject to trade tax if partners are corporations.
However, the trade tax paid at the level of a partnership may partly or entirely be credited –
depending on the applicable municipal trade tax rate and individual circumstances – against the
personal income tax liability of the partners who are individuals. Special rules for banks, financial
services institutions, financial enterprises, life and health insurance companies, and pension funds,
are described below. For capital gains of a corporation, no withholding tax is assessed. This
applies also to capital gains attributable to business assets if additional documentation
requirements are met.
Taxation of Capital Gains of Shareholders Resident Outside Germany
Capital gains realized upon disposal of shares by a shareholder resident outside Germany are only
subject to German income or corporate income tax (plus solidarity surcharge) and, as the case
may be, German trade tax in the event (I) the shares are held in a permanent establishment or
through a fixed base in Germany, or held as assets for which a permanent representative has been
appointed in Germany or (ii) the selling shareholders or, in case of a gratuitous transfer, its legal
predecessor has held, directly or indirectly, at least 1% of the share capital of the Company at any
time during the five year period prior to the disposal. No withholding tax should be assessed upon
the sale provided sufficient proof of the foreign tax status is given.
Corporations. If the shareholder is a corporation and the shares are held in a permanent
establishment, 5% of the capital gain is subject to German corporate income tax, solidarity
surcharge and German trade tax. If the corporation holds less than 15% of the share capital of the
Company at the beginning of the relevant assessment period the whole capital gain is subject to
German trade tax. If the shares are not held in a permanent establishment, but the corporation has
held at least 1% of the share capital of the Company at any time during the five-year period prior to
the disposal, 5% of the capital gain is subject to German corporate income tax and solidarity
surcharge. In this case no German trade tax will be triggered.
Sole Proprietors. If the shares are held by sole proprietors in permanent establishments 60% of
the capital gains are subject to German income tax including solidarity surcharge and, as the case
may be, German trade tax. The capital gains are not subject to German trade tax, if a sole
proprietor holds at least 15% of the share capital of the Company at the beginning of the relevant
assessment period. If the shares are not held in a permanent establishment, but the selling
Shareholder or, in case of a gratuitous transfer, its legal predecessor has held the shares, directly
or indirectly, at least 1% of the share capital of the Company at any time during the five year period
prior to the disposal the capital gain is subject to German income tax and solidarity surcharge. In
this case no German trade tax will be triggered.
Partnerships. If the shareholder is a partnership, taxation depends on whether the partners are
subject to corporate income tax or to personal income tax and the shares are held in a permanent
establishment or not. If the partners are subject to corporate income tax, 5% of any capital gains
are subject to German corporate income tax and solidarity surcharge. If the partners are subject to
personal income tax and the shares are held in a permanent establishment, 60% of the capital
gains are subject to German income tax including solidarity surcharge. If the shares are held in a
permanent establishment of the partnership and the partnership holds less than 15% of the share
capital of the Company at the beginning of the relevant assessment period the whole capital gains
are subject to German trade tax. In this case the partnership itself is liable to the German trade tax.
If the shares are not held in a permanent establishment, but the Partner has held indirectly at least
1% of the share capital of the Company at any time during the five year period prior to the disposal
the capital gain is subject to German income tax and solidarity surcharge. In this case no German
trade tax will be triggered. However, the most of the German double taxation conventions provide
for a complete exemption from German taxation (except in case (I)) in such cases and assign the
148
right to tax to the shareholder’s state of residence. Capital gains realized upon disposal of shares
held in a permanent establishment or through a fixed base in Germany, or held as assets for which
a permanent representative has been appointed in Germany, are subject to the same rules as
described above for shareholders resident in Germany.
Special Rules for Banks, Financial Services Institutions, Financial Institutions, Life and
Health Insurance Companies, and Pension Funds
To the extent banks and financial services institutions hold shares that are attributable to their
trading book pursuant to section 1 para. 12 of the German Banking Act (Kreditwesengesetz)
neither the standard tax exemption for corporations nor the part-income system applies to dividend
income received or to capital gains or losses realized upon the disposal of shares, that means
dividend income and capital gains are fully subject to corporate income tax or personal income tax
and, if applicable, to trade tax. The same applies to shares that were acquired by financial
institutions within the meaning of the German Banking Act in order to realize short-term proprietary
trading gains. Furthermore, this applies to banks, financial services institutions and financial
institutions domiciled in another Member State of the European Community or another contracting
party to the EEA Agreement. The standard tax exemption for corporations neither applies to
dividends received nor to capital gains or losses if the shares are attributable to the capital
investments (Kapitalanlagen) of life and health insurance companies or pension funds. Certain
exceptions may apply to corporations if the EU Parent/Subsidiary Directive (90/435/EEC of 23 July
1990, as amended) applies to the Company’s dividends and the preconditions of section 50d para.
3 of the German Income Tax Act are fulfilled.
Inheritance and Gift Tax
The transfer of shares by way of gift or succession is, in principle, subject to German inheritance
and gift tax only if one of the following criteria is met:
i.
The testator, donor, heir, donee, or any other beneficiary has his or her residence or habitual
abode, registered domicile or place of management in Germany at the time of the transfer or
is a German citizen who has not stayed abroad for more than five years without having a
residence in Germany;
ii.
Irrespective of these personal circumstances, the shares are held as business assets for
which a permanent establishment is maintained or a permanent representative is appointed
in Germany; or
The few double taxation treaties on inheritance and gift tax which Germany has entered into
generally provide that German inheritance or gift tax is levied only in case (i) and, with certain
restrictions, in case (ii). Special provisions apply to certain German expatriates and former German
citizens.
Other Taxes
No German capital transfer tax, value-added tax, stamp duty, or similar tax is levied on the
acquisition, sale, or other forms of transferring shares. However, an entrepreneur may opt for
value-added tax being levied on a transaction that is normally tax-exempt if the transaction is
executed for the enterprise of another entrepreneur. Net wealth tax (Vermögensteuer) is currently
not levied in Germany.
Annual Tax Act 2013
Capital gains realized by a corporate shareholder upon disposal of shares or concerning dividends
are generally exempted from corporate income tax and trade tax. Capital gains are calculated for
this purpose by the amount by which the sale price or the equivalent value after deduction of selling
costs exceeds the tax base at the time of disposal. However, 5% of the capital gains is deemed to
be a non-deductible business expense and is therefore subject to corporate income and trade tax.
This tax exemption is going to be changed as a new law will be enacted in Germany in 2013, most
likely with retrospect effect. With draft legislation concerning the implementation of the European
Court of Justice ruling of 20 October 2011 in the case C-284/09, the chamber of the German
Parliament (Bundesrat) has accepted the legislation proposal. As a consequence, the above
mentioned tax exemption will only be applicable for shareholders holding 10% or more of all shares
outstanding in a legal entity.
.
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TAXATION IN THE UK
The following information is of a general nature only and is based on the Company’s understanding
of certain aspects of the laws and practice in force in the United Kingdom as of the date of this
Prospectus. It does not purport to be a comprehensive description of all the tax considerations that
might be relevant to an investment decision. It is not intended to be, nor should it be construed to
be, legal or tax advice. It is a description of the essential material United Kingdom tax
consequences with respect to the shares of the Company and may not include tax considerations
that arise from rules of general application or that are generally assumed to be known to
Shareholders. This summary is based on the laws in force in United Kingdom on the date of this
Prospectus and is subject to any change in law that may take effect after such date. Prospective
Shareholders should consult their professional advisors with respect to particular circumstances,
the effects of state, local or foreign laws to which they may be subject and as to their tax position.
Please be aware that the residence concept used under the respective headings below applies for
United Kingdom income tax assessment purposes only. Any reference in the present section to a
tax, duty, levy impost or other charge or withholding of a similar nature refers to United Kingdom
tax laws and/or concepts only. Also, please note that a reference to United Kingdom income tax
encompasses corporate income tax, (municipal business tax, a solidarity surcharge, personal
income tax, as well as a temporary crisis contribution generally. Corporate taxpayers may further
be subject to net worth tax as well as other duties, levies or taxes.
The following paragraphs are intended as a general guide only for Shareholders who are resident and
ordinarily resident in the United Kingdom for tax purposes, holding Ordinary Shares as investments and
not as securities to be realized in the course of a trade, and are based on current legislation and HMRC
practice. Any person who is in any doubt about his tax position or who is subject to taxation in a
jurisdiction other than the UK, should consult his own professional adviser immediately.
Taxation of Chargeable Gains
To the extent that a Shareholder acquires Ordinary Shares allotted to him, the Ordinary Shares so
allotted will, for the purpose of tax on chargeable gains, be treated as acquired on the date of allotment.
The amount paid for the Ordinary Shares will constitute the base cost of a Shareholder’s holding. If a
Shareholder disposes of all or some of his Ordinary Shares, a liability to tax on chargeable gains may,
depending on his circumstances, arise.
Inheritance Tax - Business Property Relief
Unquoted Ordinary Shares representing minority interests in trading companies such as the Company
potentially qualify for 100 per cent. business property relief which gives up to 100 per cent. exemption
from Inheritance Tax. Therefore, where an investor makes a lifetime gift of shares or dies while still
owner of the shares, no inheritance tax will be payable in respect of the value of the shares, provided
certain conditions are met. The main condition is that the investor held the shares for two years before
the date of transfer or death.
Stamp duty and Stamp Duty Reserve Tax
No stamp duty or stamp duty reserve tax (SDRT) will generally be payable on the issue of Ordinary
Shares.
Dividends and other Distributions
Dividends paid by the Company will carry an associated tax credit of one-ninth of the cash dividend or
10 per cent. of the aggregate of the cash dividend and associated tax credit. Individual Shareholders
resident in the UK receiving such dividends will be liable to income tax on the aggregate of the dividend
and associated tax credit at the dividend tax rate (10 per cent.) provided all income is at or below the
basic rate tax limit or 32.5 per cent. for income at or below the £150,000 higher tax limit. There is an
additional dividend tax rate of 42.5 per cent. for all dividend income above the higher tax limit. The effect
will be that taxpayers who are otherwise liable to pay tax at only the lower rate or basic rate of income
tax will have no further liability to income tax in respect of such a dividend. Higher rate taxpayers will
have an additional tax liability (after taking onto account the tax credit) of 22.5 per cent of the aggregate
of the individual and associated tax credit. Taxpayers with income in excess of £150,000 will have a
liability of 32.5 per cent after taking into account the tax credit. Individual Shareholders whose income
tax liability is less than the tax credit will not be entitled to claim a repayment of all or part of the tax
credit associated with such dividends.
64
150
A UK resident corporate Shareholder should not be liable to corporation tax or income tax in respect of
dividends received from the Company unless that corporate Shareholder is carrying on a trade of
dealing in shares.
Trustees of discretionary trusts are liable to account for income tax at the special trust rates. The
dividend trust rate is currently 42.5 per cent for income in excess of £1,000 per annum.
Persons who are not resident in the UK should consult their own tax advisers on the possible
application of such provisions and on what relief or credit may be claimed for any such tax credit in the
jurisdiction in which they are resident. These comments are intended only as a general guide to the
current tax position in the UK as at the date of this document. The comments assume that Ordinary
Shares are held as an investment and not as an asset of financial trade.
The Company takes no responsibility for the withholding of tax at source.
If you are in any doubt as to your tax position, or are subject to tax in a jurisdiction other than the UK,
you should consult your professional adviser.
Corporation Tax
Companies incorporated and operating in the United Kingdom are liable to pay Corporation Tax on their
taxable profits wherever in the world those profits derive from. Taxable profits for Corporation Tax
include profits from taxable income such as trading profits and investment profits – (except dividend
income which is taxed differently) and capital gains - known as 'chargeable gains' for Corporation Tax
purposes.
Any person who is in any doubt as to their tax position or requires more detailed
information than the general outline above should consult their professional advisers.
151
LISTING AGREEMENT
On 13 September 2012, PRM and VEM have concluded an agreement (the “Listing Agreement”)
regarding the admission of the Company’s shares to trading in the Regulated Market on the
Frankfurt Stock Exchange.
The Listing Agreement provides that VEM may terminate the Listing Agreement under certain
circumstances, even after the shares have been allocated and included in the trading, up to
delivery and settlement. Such circumstances include in particular an adverse change or
prospective adverse change in the assets, financial condition or results of operations or an
impairment of the business of the Company or one of its subsidiaries, a material change in the
management structure of the Company, a complete or partial suspension of trading on the
Frankfurt Stock Exchange or an adverse change in the national or international financial, political,
industrial, economic or legal conditions or capital markets conditions or currency exchange rates or
an outbreak or escalation of hostilities or terrorist activities.
If the Listing Agreement is terminated, the Offering will be canceled by the Company. In such case,
share subscriptions which have already been allocated to investors will be invalidated and
investors will have no claim for delivery. Investors who have engaged in short sales of shares will
bear the risk of not being able to fulfill their delivery obligations in connection with such sale.
PRM has agreed in the Listing Agreement to indemnify and hold harmless VEM and its directors,
officers, partners and employees, any affiliate and each person who may be deemed to control
VEM (each an ‘‘Indemnified Person’’) against any losses, claims, damages, liabilities, charges,
expenses or demands (or actions in respect thereof) (‘‘Losses’’) to which such Indemnified Person
may become subject and which arise out of, or in relation to, or in connection with (i) any breach by
PRM of its representations and warranties pursuant to the Listing Agreement or (ii) any untrue
statement of a material fact contained in the Prospectus or any omission to state therein a material
fact required to be stated therein necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In each such case, PRM will in addition reimburse each Indemnified Person for any properly
documented legal or other expenses (together with any amount equal to Value Added Tax (“VAT”),
if applicable) incurred by such Indemnified Person in connection with investigation or defending any
such action or claim including with respect to an alleged breach, alleged untrue statements, or an
alleged omission as such expenses are incurred.
VEM may, from time to time, engage in transactions or perform services for the Company in the
ordinary course of business.
152
RECENT DEVELOPMENTS AND OUTLOOK
Despite the negative impact arising from the global financial crisis, China emerged relatively
unscathed and became the world’s second largest economy, based on nominal GDP, overtaking
Japan in 2010. As a Special Administrative Region (SAR) of China, Hong Kong’s growth is tied to
that of China.
Owing to the rapid economic growth coupled with accelerating urbanization, urban households
have continued to enjoy higher levels of disposable income and with the rise in affluence comes an
increase in ability to purchase products of higher quality. In light of this positive trend, PRM expects
the demand for dried seafood, herbal medicine and health supplement products to grow, as target
consumers shift to spend more money on luxurious food and ingredients.
The strong historical growth rates are a good indication of increased demand over the next few
years. In EUR terms, the double digit year-on-year growth translated into a three year compounded
annual growth rate (“CAGR”) of 56,62% for the financial years as of 30 September 2010 to 30
September 2012. PRM is optimistic that it will continue to register strong revenue growth. This is
partly evidenced by revenue of TEUR 10,889 and a profit after tax of TEUR 1,055 for the financial
year ended 30 September 2012 compared with TEUR 6,856 and a profit after tax of TEUR 400 for
the financial year ended 30 September 2011 or compared to revenue of TEUR 2.834 and a profit
after tax of TEUR 62 for the same period of 2010. This growth is fuelled organically by the opening
of 10 retail stores in 2011 and 2012, which is further aided by the increased marketing efforts by
PRM.
PRM intends to boost sales and enhance its gross profit margins by setting up its flagship and
corner store concept, a process it initiated in 2012.
To keep pace with the sales growth and more importantly, to sustain and nurture it, PRM will
continue to invest at an appropriate level in advertising and product development activities.
Since 30 September 2012 no significant changes with regard to the financial condition and the
trading and the market position of PRM Group have occurred.
REGULATORY ENVIRONMENT
OVERVIEW OF LAWS AND REGULATIONS IN HONG KONG
Chinese Medicine Ordinance
Some of the products are listed as Chinese herbal medicine under Schedule 2 of the Chinese
Medicine Ordinance (Chapter 549 of the Laws of Hong Kong) (the “Chinese Medicine Ordinance”).
Traders of the Products are subject to restrictions set out in and governed by the Medicines Board
established under the Chinese Medicine Ordinance. Pursuant to the Chinese Medicine
Ordinance, no person can sell the Products by retail or by way of wholesale unless a retailer or
wholesaler license is obtained from the Medicines Board.
Food Safety Ordinance
The Food Safety Ordinance (Chapter 612 of the Laws of Hong Kong) (the “Food Safety
Ordinance) was promulgated in 1 August 2011. The purpose of the Food Safety Ordinance is to
maintain a complete list of food importers in Hong Kong in case of a food incident. The Products
fall within the scope of the Food Safety Ordinance.
Food importers and food distributors need to register with the director of Food and Environmental
Hygiene. At the time of promulgation of the Food Safety Ordinance, registration was not yet an
obligation but an option. Sections 4 and 5 of the Food Safety Ordinance, which prohibit food
importers and food distributors from operation without prior registration with the director of Food
and Environmental Hygiene, came into effect six months after 1 August 2011.
153
As stipulated in the Food Safety Ordinance, contravention of any of the abovementioned
registration requirements is an offence and the offender is liable on conviction to a fine and
imprisonment.
Taxation
(i)
Profits Tax
PRM is subject to Hong Kong profits tax in respect of profits arising in or derived from Hong Kong
from a trade, profession or business. The prevailing tax rate is 16.5%. However, dividend income
should not be taxable for Hong Kong profits tax purposes.
Hong Kong does not impose withholding tax on dividends. Dividend payments made by Hong Kong
companies to non-Hong Kong holding companies are therefore not subject to withholding tax in
Hong Kong.
(ii)
Stamp Duty
Both the purchase and sale of shares in Hong Kong incorporated companies will be subject to
Hong Kong stamp duty at 0.1% on the higher of the consideration paid and the fair market value.
PRM Group’s operation and business are subject to potential changes in the abovementioned and
other laws and regulations.
Consumer Council Ordinance
The Consumer Council Ordinance (Chapter 216 of the Laws of Hong Kong) (the “Consumer
Council Ordinance”) was promulgated on 15 July 1977. The purpose of the Consumer Council
Ordinance is to incorporate the Consumer Council to protect the rights of consumers, to define its
functions and powers, to negative personal liability of members and employees for the Council’s or
its committees’ acts or omissions, and for the connected purposes.
Sales of Goods Ordinance
The Sales of Goods Ordinance (Chapter 26 of the Laws of Hong Kong) (the “Sales of Goods
Ordinance”) was promulgated on 1 August 1896. The purpose of the Sales of Goods Ordinance is
to codify the law relating to the sale of goods.
Consumer Goods Safety Ordinance
The Consumer Goods Safety Ordinance (Chapter 456 of the Laws of Hong Kong) (the “Consumer
Goods Safety Ordinance”) was promulgated on 20 October 1995. The purpose of the Consumer
Goods Safety Ordinance is to impose a duty on manufacturers, importers and suppliers of certain
consumer goods to ensure that the consumer goods they supply are safe and for incidental
purposes.
Electronic Transaction Ordinance
The Electronic Transaction Ordinance (Chapter 553 of the Laws of Hong Kong) (the “Electronic
Transaction Ordinance”) was promulgated on 7 January 2000. The Electronic Transaction
Ordinance authorizes the use of electronic and digital signatures and electronic records as valid
communication methods. It provides for the legal validity of digital signatures and electronic
records, as well as for the retention of electronic records and their admissibility in any legal
proceeding. Additionally, the Electronic Transaction Ordinance explains the requirements for the
formation of an electronic contract, and establishes regulations for the licensure of certification
authorities.
Personal Data (Privacy) Ordinance
The Personal Data (Privacy) Ordinance (Chapter 486 of the Laws of Hong Kong) (the “Personal
Data Ordinance”) was promulgated in December 1995. The purpose of the Personal data (Privacy)
Ordinance is to regulate the collection, use, accuracy and security of personal data. The Personal
154
data (Privacy) Ordinance apples to both the public and private sectors, of which the databases
where the data is collected, held, processed or used in Hong Kong; or controlled by an entity
whose principle place of business is in Hong Kong.
155
FINANCIAL SECTION
Interim Financial Statements of Pacific Retail Merchants AG, München as of 30
F-2
September 2012
Statements of financial position
F-3
Statements of comprehensive income
F-4
Statements of cash flows
F-5
Statements of changes in equity
F-6
Notes to the Interim Financial Statements
F- 7-22
Independent Auditor's Report
F- 23
Consolidated Financial Statements for the years ended 30 September 2012, 2011
F-24
and 2010 of Giant Luxury Holdings Limited, Hong Kong
Consolidated Statements of financial position
F-25
Consolidated Statements of comprehensive income
F-26
Consolidated Statements of changes in equity
F-27
Consolidated Statements of cash flows
F-28-29
Notes to the Interim Financial Statements
F- -3059
Independent Auditor's Reports
F- 60
F-1
PACIFIC RETAIL MERCHANTS AG, MÜNCHEN
INTERIM FINANCIAL STATEMENTS as of 30 September 2012
F-2
F-3
F-4
F-5
F-6
Notes to the Interim Financial Statements of Pacific Retail Merchants AG
1
CORPORATE INFORMATION
Pacific Retail Merchants AG (hereinafter referred to as "the Company") was founded by means of a
notarial deed of formation as a shelf company on 8 February 2012 and registered in the commercial
register on 24 April 2012. The completion of the formation became legally effective by registration in
the commercial register of the local court of Munich on 24 April 2012.
The principal activity of the Company is that of an investment holding.
2
SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance and basis of preparation
As the formation of the Company had legal effect on 24 April 2012, the short financial period began on
24 February 2011 and ends on the date of the interim financial statements on
30 September 2012. As this is the first financial year of the company, the statements of financial
position; comprehensive income and the statements of cash flows has no comparatives.
The interim financial statements of the Company have been prepared in accordance with International
Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB),
London, the Interpretations of the International Financial Reporting Interpretations Committee (IFRIC)
as endorsed by the European Union (EU) and in effect as at closing date ("IFRS"). Furthermore, the
additional requirements of the German Commercial Code ("Handelsgesetzbuch" or "HGB") have been
considered. The interim financial statements have been prepared on a historical cost basis, except as
disclosed in the accounting policies below.
These interim financial statements have been drawn up in Euros ("EUR").
The preparation of the interim financial statements in conformity with IFRS requires management to
exercise its judgement in the process of applying the Company's accounting policies. It also requires
the use of accounting estimates and assumptions that affect the reported amounts of assets and
liabilities and the reported amounts of revenues and expenses during the relevant period. Critical
accounting estimates and assumptions used that are significant to the financial statements and areas
involving a higher degree of judgement or complexity are disclosed in this Note.
Adoption of new and revised standards and interpretations
The accounting policies, which were adopted, are:
IAS 24 Related Party Disclosures (amendment) effective 1 January 2011
IAS 32 Financial Instruments: Presentation (amendment) effective 1 February 2010
IFRIC 14 Prepayments of a Minimum Funding Requirement (amendment) effective 1 January 2011
Improvements to IFRSs (May 2010)
The adoption of the standards or interpretations is described below:
IAS 24 Related Party Transactions (Amendment)
The lASS issued an amendment to IAS 24 that clarifies the definitions of a related party. The new
definition emphasize a symmetrical view of related party relationships and clarifies the circumstances
in which persons and key management personnel affect related party relationships of an entity. In
addition, the amendment introduces an exemption from the general related party disclosure
requirements for transactions with government and entities that are controlled, jointly controlled or
significantly influenced by the same government as the reporting entity. The adoption of the
amendment did not have any impact on the financial position or performance of the Company.
IAS 32 Financial Instruments: Presentation (Amendment)
The lASS issued an amendment that alters the definition of a financial liability in IAS 32 to enable
entities to classify rights issues and certain options or warrants as equity instruments. The
amendment is applicable if the rights are given pro rata to all of the existing owners of the same class
of an entity's non-derivative equity instruments, to acquire a fixed number of the entity's own equity
F-7
instruments for a fixed amount in any currency. The amendment has had no effect on the financial
position or performance of the Company because the Company does not have these types of
instruments.
IFRIC 14 Prepayments of a Minimum Funding Requirement (Amendment)
The amendment removes an unintended consequence when an entity is subject to minimum funding
requirements and makes an early payment of contributions to cover such requirements. The
amendment permits a prepayment of future service cost by the entity to be recognised as a pension
asset. The Company is not subject to minimum funding requirements in Euroland, therefore the
amendment of the interpretation has no effect on the financial position nor performance of the
Company.
Improvements to IFRSs
In May 2010, the lASS issued its third omnibus of amendments to its standards, primarily with a view
to removing inconsistencies and clarifying wording. There are separate transitional provisions for each
standard. The adoption of the following amendments resulted in changes to accounting policies, but
no impact on the financial position or performance of the Company.
IAS 1 Presentation of Financial Statements:
The amendment clarifies that an entity may present an analysis of each component of other
comprehensive income maybe either in the statement of changes in equity or in the notes to the
financial statements.
Adoption of new and revised standards and interpretations
IFRS 3 Business Combinations
The measurement options available for non-controlling interest (NCI) were amended. Only
components of NCI that constitute a present ownership interest that entitles their holder to a
proportionate share of the entity's net assets in the event of liquidation should be measured at either
fair value or at the present ownership instruments' proportionate share of the acquirer's identifiable net
assets. All other components are to be measured at their acquisition date fair value.
IFRS 7 Financial Instruments -Disclosures
The amendment was intended to simplify the disclosures provided by reducing the volume of
disclosures around collateral held and improving disclosures by requiring qualitative information to put
the quantitative information in context.
IAS 12 Income Taxes -Recovery of Underlying Assets
The amendment clarified the determination of deferred tax on investment property measured at fair
value. The amendment introduces a rebuttable presumption that deferred tax on investment property
measured using the fair value model in IAS 40 should be determined on the basis that its carrying
amount will be recovered through sale. Furthermore, it introduces the requirement that deferred tax
on non-depreciable assets that are measured using the revaluation model in IAS 16 always be
measured on a sale basis of the asset. The amendment became effective for annual periods
beginning on or after 1 January 2012. These new interpretation and amendments to interpretations
did not have any impact on the accounting policies, financial position or performance of the Company:
Other amendments resulting from Improvements to IFRSs to the following standards did not have any
impact on the accounting policies, financial position or performance of the Company:
IFRS 3 Business Combinations (Contingent consideration arising from business combination prior to
adoption of IFRS 3 (as revised in 2008))
IFRS 3 Business Combinations (Un-replaced and voluntarily replaced share-based payment awards)
IAS 27 Interim and Separate Financial Statements
IAS 34 Interim Financial Statements
The following interpretation and amendments to interpretations did not have any impact on the
accounting policies, financial position or performance of the Company:
IFRIC 13 Customer Loyalty Programmes (determining the fair value of award credits)
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
F-8
Standards issued but not yet effective
Standards issued but not yet effective up to the date of issuance of the Company's financial
statements are listed below. This listing of standards and interpretations issued are those that the
Company reasonably expects to have an impact on disclosures, financial position or performance
when applied at a future date. The Company intends to adopt these standards when they become
effective.
IAS 1 Financial Statement Presentation - Presentation of Items of Other Comprehensive Income
The amendments to IAS 1 change the companying of items presented in OCI. Items that could be
reclassified (or 'recycled') to profit or loss at a future point in time (for example, upon derecognition or
settlement) would be presented separately from items that will never be reclassified. The amendment
affects presentation only and has there no impact on the Company's financial position or
performance. The amendment becomes effective for annual periods beginning on or after 1 July
2012.
IAS 19 Employee Benefits (Amendment)
The IASB has issued numerous amendments to IAS 19. These range from fundamental changes
such as removing the corridor mechanism and the concept of expected returns on plan assets to
simple clarifications and re-wording. The Company is currently assessing the full impact of the
amendments, yet as the Company does not have any defined benefit plans, it is expected that the
amendments do not have any material impact on the Company's financial position or performance.
The amendment becomes effective for annual periods beginning on or after 1 January 2013. IAS 27
Separate Financial Statements (as revised in 2011)
As a consequence of the new IFRS 10 and IFRS 12, what remains of IAS 27 is limited to accounting
for subsidiaries, jointly controlled entities, and associates in separate financial statements. The
Company does not present separate financial statements. The amendment becomes effective for
annual periods beginning on or after 1 January 2013.
IAS 28 Investments in Associates and Joint Ventures (as revised in 2011)
As a consequence of the new IFRS 11 and IFRS 12. IAS 28 has been renamed IAS 28 Investments in
Associates and Joint Ventures, and describes the application of the equity method to investments in
joint ventures in addition to associates. The Company does not have any such investments. The
amendment becomes effective for annual periods beginning on or after 1 January 2013.
IFRS 7 Financial Instruments: Disclosures - Enhanced Derecognition Disclosure Requirements
The amendment requires additional disclosure about financial assets that have been transferred but
not derecognised to enable the user of the Company's financial statements to understand the
relationship with those assets that have not been derecognised and their associated liabilities. In
addition, the amendment requires disclosures about continuing involvement in derecognised assets to
enable the user to evaluate the nature of, and risks associated with, the entity's continuing
involvement in those derecognised assets. The amendment becomes effective for annual periods
beginning on or after 1 July 2011. The amendment affects disclosure only and has no impact on the
Company's financial position or performance.
IFRS 9 Financial Instruments: Classification and Measurement
IFRS 9 as issued reflects the first phase of the IASBs work on the replacement of IAS 39 and applies
to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The
standard is effective for annual periods beginning on or after 1 January 2013. In subsequent phases,
the IASB will address hedge accounting and impairment of financial assets. The completion of this
project is expected over the course of 2011 or the first half of 2012. The adoption of the first phase of
IFRS 9 will have an effect on the classification and measurement of the Company's financial assets,
but will potentially have no impact on classification and measurements of financial liabilities. The
Company will quantify the effect in conjunction with the other phases, when issued, to present a
comprehensive picture.
IFRS 10 Interim Financial Statements
IFRS 10 replaces the portion of IAS 27 Interim and Separate Financial Statements that addresses the
accounting for interim financial statements. It also includes the issues raised in SIC-12 Consolidation Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities
including special purpose entities. The changes introduced by IFRS 10 will require management to
F-9
exercise significant judgement to determine which entities are controlled, and therefore, are required
to be interim by a parent, compared with the requirements that were in IAS 27. This standard
becomes effective for annual periods beginning on or after 1 January 2013.
IFRS 11 Joint Arrangements
IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities -Nonmonetary Contributions by Venturers. IFRS 11 removes the option to account for jointly controlled
entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint
venture must be accounted for using the equity method. The Company does not have any such
investments. This standard becomes effective for annual periods beginning on or after 1 January
2013.
IFRS 12 Disclosure of Involvement with Other Entities
IFRS 12 includes all of the disclosures that were previously in IAS 27 related to interim financial
statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28.
These disclosures relate to an entity's interests in subsidiaries, joint arrangements, associates and
structured entities. A number of new disclosures are also required. This standard becomes effective
for annual periods beginning on or after 1 January 2013.
IFRS 13 Fair Value Measurement
IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13
does not change when an entity is required to use fair value, but rather provides guidance on how to
measure fair value under IFRS when fair value is required or permitted. The Company is currently
assessing the impact that this standard will have on the financial position and performance. This
standard becomes effective for annual periods beginning on or after 1 January 2013.
Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of
intangible assets acquired in a business combination is its fair value as at the date of acquisition.
Following initial recognition, intangible assets are carried at cost less any accumulated amortization
and any accumulated impairment losses. The useful lives of intangible assets are assessed to be
either finite or indefinite. Intangible assets with finite lives are amortized on a straight-line basis over
the estimated economic useful lives and assessed for impairment whenever there is an indication that
the intangible asset may be impaired. The amortization period and the amortization method of an
intangible asset with a finite useful life are reviewed at least at each financial year-end. Intangible
assets with indefinite useful lives are tested for impairment annually or more frequently if the events or
changes in circumstances indicate that the carrying value may be impaired either individually or at the
cash-generating unit level. Such intangibles are not amortized. The useful life of an intangible asset
with an indefinite life is reviewed annually to determine whether the useful life assessment continues
to be supportable. For the period presented, the Company does not hold any intangible assets with an
indefinite useful life.
Consideration paid for land use rights are recorded as land use rights, under which the lessor has not
transferred all the risks and benefits of ownership to the lessee. Land use rights are stated at cost
less accumulated amortization. Amortization is charged to the statement of profit and loss on a
straight-line basis over the terms of the respective leases.
Research and development costs
Research costs are expensed as incurred. An intangible asset arising from development expenditure
on an individual project is recognised only when the Company can demonstrate the technical
feasibility of completing the intangible asset so that it will be available for use or sale, its intention to
complete and its ability to use or sell the assets, how the asset will generate future economic benefits,
the availability of resources to complete and the ability to measure reliably the expenditure during the
development.
Research and development costs
The amount initially recognised for internally generated intangible assets is the sum of the
expenditure incurred from the date when the intangible asset first meets the recognition criteria listed
above. Where no internally-generated intangible asset can be recognised, development expenditure
is charged to profit and loss for the period in which it is incurred.
F - 10
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less
accumulated amortisation and accumulated impairment losses.
The carrying value of development costs is reviewed for impairment annually when the asset is not
yet in use or more frequently when an indication of impairment arises during the reporting year. No
internally generated intangible assets have been recognised in the interim financial statements as of
30 September 2012.
Property, plant and equipment and depreciation
All items of property, plant and equipment are initially recorded at cost. The cost of the asset
comprises its purchase price and any directly attributable cost of bringing the asset to its working
condition and location for its intended use. In addition, cost also includes borrowing costs for longterm construction projects, if the recognition criteria are met. Subsequent costs are included in the
asset's carrying amount or recognised as separate asset, as appropriate, only when the cost is
incurred and it is probable that the future economic benefits associated with the item will flow to the
Company and the cost of the item can be measured reliably. The cost of the day-to-day servicing of
property, plant and equipment are recognised in the profit or loss as incurred. Property, plant and
equipment acquired in a business combination are initially recorded at their fair values as at
acquisition date.
After initial recognition, property, plant and equipment are stated at cost less accumulated
depreciation and any accumulated impairment loss.
Construction in progress includes all costs of construction and other direct costs. No depreciation is
provided on construction in progress until such time as it is completed and ready for use. Construction
in progress is reclassified to the appropriate category of property, plant and equipment when complete
and ready to use.
Property, plant and equipment are depreciated using the straight-line method, less estimated residual
value over their estimated useful lives. The estimated useful lives have been taken as follows:
Estimated useful lives (Years) Leasehold buildings 20 Plant and machinery 5 -10 Office equipment 5
Motor vehicles 5 Furniture and fitting 5 Fully depreciated assets are retained in the financial
statements until they are no longer in use.
The estimated useful life and depreciation method are reviewed and adjusted as appropriate, at each
balance sheet date to ensure that the amount, method and period of depreciation are consistent with
the expected pattern of economic benefits from items of property, plant and equipment.
The gain or loss arising on disposal or retirement of an item of property, plant and equipment is
determined as the difference between the sales proceeds and the carrying amounts of the asset and
is recognized in the profit or loss.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. They arise when the Company provides money, goods or services
directly to a debtor with no intention of trading the receivable. They are included in current assets,
except those maturing more than 12 months after the balance sheet date which are classified as noncurrent assets. Loans and receivables are presented as trade and other receivables, other current
assets and cash and cash equivalents on the balance sheet.
At subsequent reporting dates, loan and receivables are measured at amortized cost using the
effective interest rate method.
Inventories
Inventories are valued at the lower of cost and net realisable value. Raw materials comprise purchase
cost accounted for on a weighted average basis. Finished goods comprise cost of materials, direct
labour and an attributable proportion of manufacturing overheads.
Net realisable value is the estimated selling price, less estimated costs of processing and costs to be
incurred for selling and distribution.
Cash and cash equivalents
For the purpose of the interim cash flow statement, cash and cash equivalent comprises cash on
hand and in banks, excluding cash deposits pledged for period of more than three months. Cash and
cash equivalents are short term, highly liquid investments readily convertible to known amounts of
cash and subjected to an insignificant risk of changes in value and have a short maturity of generally
within three months when acquired.
F - 11
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction from the proceeds.
Financial liabilities
Financial liabilities within the scope of IAS 39 are recognised on the balance sheet when, and only
when, the Company becomes a party to the contractual provisions of the financial instrument.
Financial liabilities are recognised initially at fair value, plus, in the case of financial liabilities not at fair
value through profit and loss, directly attributable transaction costs. Subsequent to initial recognition,
derivatives are measured at fair value. Other financial liabilities (except for financial guarantee) are
measured at amortised cost using the effective interest method.
For financial liabilities other than derivatives, gains and losses are recognised in profit or loss when
the liabilities are derecognised, and through the amortisation process. Any gains or losses arising
from changes in fair value of derivatives are recognised in profit or loss. Net gains or losses on
derivatives include exchange differences.
A financial liability is derecognised when the obligation under the liability is extinguished. When an
existing financial liability is replaced by another from the same lender on substantially different terms,
or the terms of an existing liability are substantially modified, such an exchange or modification is
treated as a de-recognition of the original liability and the recognition of a new liability, and the
difference in the respective carrying amounts is recognised in the profit or loss.
Financial liabilities are classified as financial liabilities at fair value through profit or loss or other
financial liabilities. The Company determines the classification of its financial liabilities at initial
recognition. As of 30 September 2012, the Company did not have any financial liabilities in the
category financial liabilities at fair value through profit or loss.
Borrowings
Borrowings are initially recorded at fair value, net of transaction costs incurred and subsequently
accounted for at amortised costs using the effective interest method. Borrowings which are due to be
settled within twelve months after the balance sheet date are included in other current liabilities in the
balance sheet even though the original term was for a period longer than twelve months and an
agreement to refinance, or to reschedule payments, on a long-term basis is completed after the
balance sheet date and before the financial statements are authorised for issue. Other borrowings
due to be settled more than twelve months after the balance sheet date are included in non-current
liabilities in the balance sheet.
Operating lease
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the
leased item are classified as operating leases. Operating lease payments are recognised as an
expense in the profit or loss on a straight-line basis over the lease term. The aggregate benefit of
incentives provided by the lessor is recognised as a reduction of rental expense over the lease term
on a straight-line basis.
F - 12
Provisions
A provision is recognised when there is a present obligation, legal or constructive, as a result of a past
event and it is probable that an outflow of resources embodying economic benefits will be required to
settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions
are reviewed regularly at each balance sheet date and adjusted to reflect the current best estimate. If
it is no longer probable that an outflow of economic resources will be required to settle the obligation,
the provision is reversed and recognised in profit and loss of the period. Where the effect of the time
value of money is material, the provision is discounted using a current pre tax rate that reflects, where
appropriate, the risks specific to the liability. When discounting is used, the increase in the provision
due to the passage of time is recognised as a financial cost.
Revenue recognition
Revenue is recognised when it is probable that the economic benefits will flow to the Company and
when the revenue can be measured reliably. The following specific recognition criteria must be met
before revenue is recognised:
Revenue from sale of goods is recognised upon the transfer of significant risks and rewards of
ownership, which generally coincides with the time when the goods are delivered to customers and
title has passed. Revenue is not recognised to the extent where there are significant uncertainties
regarding recovery of the consideration due, associated costs or the possible return of goods.
Interest income is recognised on a time proportion basis, taking into account the principal amounts
outstanding and the effective interest rates applicable.
Employee benefits
Current and deferred Income tax
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as
reported in the profit or loss because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are not taxable or tax deductible. The
Company's liability for current tax is calculated using tax rates and tax laws that have been enacted or
substantively enacted in the countries where the entities operate by the balance sheet date.
Current and deferred Income tax
In respect of deductible temporary differences associated with investments in subsidiaries, associates
and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable
that the temporary differences will reverse in the foreseeable future and taxable profit will be available
against which the temporary differences can be utilised
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part
of the asset to be recovered.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset realised based on tax rates and tax laws that have
been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited
to profit or loss, except when it relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current
tax assets against current tax liabilities and when they relate to income taxes levied by the same
taxation authority and the Company intends to settle its current tax assets and liabilities on a net
basis.
Value-added-tax ("VAT")
The Company's sales of goods in Germany are subject to VAT at the applicable tax rate of usual 19%
(or 7 % for special goods) for German domestic sales. Input tax on purchases can be deducted from
output VAT. The net amount of VAT recoverable from, or payable to, the taxation authority is included
as part of "Trade and other receivables" or "Trade payables" in the balance sheet. The Company's
export sales are not subject to VAT.
F - 13
Related parties
Parties are considered to be related, if one party has the ability, directly or indirectly, to control the
other party, or exercise significant influence over the other party in making financial and operating
decisions. Parties are also considered to be related if they are subject to common control or common
significant influence. Related parties may be individuals or corporate entities.
Significant accounting estimates and judgements
Estimates and assumptions concerning the future are made in the preparation of the interim financial
statements. They affect the application of the Company's accounting policies, reported amounts of
assets, liabilities and income and expenses, and disclosures made. They are assessed on an ongoing basis and are based on experience and relevant factors, including expectations of future events
that are believed to be reasonable under the circumstances
Estimates and judgments are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the
circumstances. Resulting accounting estimates will, by definition, seldom equal the related actual
results.
Significant accounting estimates and judgements
Critical judgments made in applying the accounting principles are discussed below:
Cash equivalents or trade receivables have been acquired in the acquisition. No liabilities have been
assumed.
F - 14
3
Notes on financial statement positions
3.1 Other operating expenses
24.04. – 30.09.2012
Other operating expenses
Sum
EUR
EUR
(7,062.75)
(7,062.75)
3.2 Income tax
Deferred taxes on losses carried forward
Deferred taxes on advance payments
Sum
EUR
EUR
24.04. – 30.09.2012
53,731.15
(51,624.69)
2,106.46
3.3 Earnings per share
Basic earnings per share are calculated by dividing the profit attributable to equity holders of the
company by the weighted average number of ordinary shares in issue during the financial year.
24.04. –
30.09.2012
Loss of the Period
EUR
(4,956.29)
Weighted average number of issued and outstanding no par
50,000.00
shares
Basic and diluted earnings per share
EUR
(0.1)
3.4 Current assets
Cash and cash equivalents
Sum
EUR
EUR
24.04. –
30.09.2012
47,937.25
47,937.25
3.5 Cash and cash equivalents
The balance as of 30 September 2012 reflects the company’s credit on its bank accounts.
3.6 Advance payments
The advance payments as of 30 September 2012 reflect capitalized costs of shareholder equity
procurement.
3.7 Provisions
Provisions for accounting/-retention
sum
EUR
EUR
24.04. –
30.09.2012
5,000.00
5,000.00
The capitalized advance payments refer to costs of shareholders equity procurement that is not
finished as at 30 September 2012.
3.8 Current and deferred Income tax
Deferred tax
Relating to origination and reversal of temporary differences the deffered tax relates to the following
positions of the statements of financial postion (“+ deferred tax assets”/ “- deferred tax liabilities”):
September 30, 2012
Advance payments
Accumulated losses
Deferred tax assets
EUR
EUR
EUR
F - 15
- 51,624.69
+ 53,731.15
+ 2,106.46
Deferred tax assets occur on advance payments in the amount of EUR 51,624.69). Deferred tax
liabilities occur on accumulated losses in the amount of EUR 53,731.15) which, according to the
budget of the company, can be utilized in future. The tax rate which was used for the calculation of the
deferred tax liabilities on accumulated losses was the tax rate of the company, that was 29,825 %.
F - 16
Tax reconciliation:
Profit and Loss before taxes
Tax rate
Expected tax revenue
Changes:
Deferred taxes advance payments / losses
carried forward
Tax revenue
Effective tax rate
F - 17
Sep 30, 2012
EUR (7,062.75)
29,825%
0.00
EUR 2,106.46
EUR 2,106.46
29,825%
3.9 Share capital
The Company was founded by means of a notarial deed of formation dated 08 February 2012. The
completion of the formation became legally effective by registration in the commercial register of the
local court of Munich on 24 April 2012.
Subscribed Capital
The Company formed with a subscribed capital of EUR 50,000,00 and is divided into 50,000,00
bearer shares with nominal value of 1.00 EUR each. The subscribed share capital was provided in
cash.
Authorized Capital
At date as of 30 September 2012 there is no existing authorized capital of the company.
3.10 Liabilities
Trade payables
Provisions
Sum
The financial liabilities compri
EUR
EUR
EUR
24.04. –
30.09.2012
173,092.00
5,000.00
178,092.00
EUR
EUR
24.04. –
30.09.2012
221,029.25
173,092.00
3.11 Financial risk management
Financial assets
Financial liabilities
The maturity of the financial assets and liabilities are all within one year.
Fair value hierarchy
The Company classify fair value measurement using fair value hierarchy that reflects the significance
of the inputs used in making the measurements. The fair value hierarchy have the following levels:
Level 1-Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2-Other techniques, for which all inputs which have a significant effect on the recorded fair
value, are observable, either directly or indirectly;
Level 3-Techniques which use inputs for the assets or liability that have a significant effect on the
recorded fair value that are not based on observable market data.
As at 30 September 2012 the Company held no assets within the scope of IAS 39, which are
recorded at fair value.
Events after the reporting period
With board decision of 6 December 2012 the company decided to do a capital increase by way of
contribution in kind. The share capital of the Company at 30 September 2012 amounted to EUR
50,000,00. On 6 December 2012 the shareholders’ meeting has resolved to increase the share capital
of the Company by EUR 6,353,007 to EUR 6,403,007 by issuance of 6,353,007 registered shares
without par value and each of such shares having a portion of the Company’s share capital in the
amount of EUR 1.00. Such capital increase shall be carried out against contribution in kind
(Sacheinlage) of all shares of the share capital of Giant Luxury Holdings Ltd., a limited liability
company incorporated under the laws of Hong Kong and which is registered in the Companies
Registry of Hong Kong under company no. 1631959. It is currently divided into 6,403,007 ordinary
registered shares with no par value (Stückaktien).
The company has applied for initial public offering on 2 January 2013.
F - 18
ADDITIONAL DISCLOSURE
The company had no employees while the reporting period.
For the period from 24 April 2012 - 9 August 2012 Nicole Lotz, München was the director of the
company.
From 09 August 2012 - 30 September 2012 the had the following directors:
Wong, Wai Keung (Hong Kong)
Chung, Wing Chin (Hong Kong)
Yeung, Fung Lin (Hong Kong)
(i) Total remuneration granted to members of the management body
In the reporting period there has been no payments to the management at all.
(ii) Total remuneration granted to members of the supervisory board
In the reporting period there has been no payments to the supervisory board.
F - 19
(iii) payments to the auditor
The total remuneration of the auditor for the interim financial year ended 30 September 2012 is
disclosed below (in TEUR):
24. April 2012 30. September 2012
a) Audit fees
b) Tax consultancy services
c) other services
Total
0,00
0,00
12,000.00
12,000.00
Munich, 28 December 2012
_____________________
Management Board
F - 20
"Independent Auditor’s Report (Translation)
To Pacific Retail Merchants AG, München
We have audited the Interim financial statements prepared by the Pacific Retail Merchants AG,
München, comprising the statements of financial position, the statements of comprehensive income,
statement of changes in equity, cash flow statement and the notes to the Interim financial statements
for the financial period from 24 April 2012 until 30 September 2012. The preparation of the Interim
financial statements in accordance with IFRSs as adopted by the EU, and the additional requirements
of German commercial law pursuant to § 317 ff HGB are the responsibility of the company’s
management. Our responsibility is to express an opinion on the Interim financial statements report
based on our audit. In addition we have been instructed to express an opinion as to whether the
consolidated financial statements comply with full IFRS.
We conducted our audit of the Interim financial statements in accordance with § 317 HGB and
German generally accepted standards for the audit of financial statements promulgated by the Institut
der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Those standards require that we
plan and perform the audit such that misstatements materially affecting the presentation of the net
assets, financial position and results of operations in the Interim financial statements in accordance
with the applicable financial reporting is detected with reasonable assurance. Knowledge of the
business activities and the economic and legal environment of the company and expectations as to
possible misstatements are taken into account in the determination of audit procedures.
The effectiveness of the accounting-related internal control system and the evidence supporting the
disclosures in the Interim financial statements are examined primarily on a test basis within the
framework of the audit. The audit includes assessing the Interim financial statements and the
accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the Interim financial statements. We believe that our audit provides a
reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the findings of our audit, the Interim financial statements comply with IFRSs
as adopted by the EU, the additional requirements of German commercial law and full IFRS and give
a true and fair view of the net assets, financial position and results of operations of the Company in
accordance with these requirements.”
Munich, 30 January 2013
VEDA WP GmbH
Wirtschaftsprüfungsgesellschaft
Roland Weigl
Wirtschaftsprüfer
(Certified Accountant)
F - 21
GIANT LUXURY HOLDINGS LIMITED, Hong Kong
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 SEPTEMBER 2012, 2011 AND 2010
F - 22
GIANT LUXURY HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As of 30 September 2012, 30 September 2011 and 30 September 2010
Note
30.09.2012
EUR
30.09.2011
EUR
30.09.2010
EUR
7
28(d)
319,994
561,047
188,060
-
104,880
-
881,041
188,060
104,880
3,730,604
3,202,463
292,750
22,354
491,654
2,269,070
724,688
220,990
1,098,251
234,351
184,123
Total current assets
7,739,825
3,214,748
1,516,725
TOTAL ASSETS
8,620,866
3,402,808
1,621,605
502,890
1,635,720
1
507,198
1
97,544
2,138,610
507,199
97,545
1,149,859
38,957
8,003
6,943
12,216
1,188,816
8,003
19,159
3,318
2,337,159
1,622,893
358,331
958,665
13,074
10,837
1,965,506
763,310
136,874
6,915
4,164
9,500
881,800
581,382
19,286
9,232
3,701
Total current liabilities
5,293,440
2,887,606
1,504,901
Total liabilities
6,482,256
2,895,609
1,524,060
Total liabilities and equity
8,620,866
3,402,808
1,621,605
ASSETS
Non-current assets
Plant and equipment
Loan to a director
Total non-current assets
Current assets
Inventories
Trade and other receivables
Amount due from ultimate holding company
Loan to a director
Cash and cash equivalents
EQUITY AND LIABILITIES
Equity
Share capital
Reserves
9
10
28(e)
28(d)
11
12
TOTAL EQUITY
LIABILITIES
Non-current liabilities
Bank borrowings
Obligation under finance lease
13
14
Total non-current liabilities
Current liabilities
Bank overdrafts
Trade and other payables
Amounts due to related parties
Income tax payable
Bank borrowings
Obligation under finance lease
11
15
28(c)
16
13
14
The accompanying notes form an integral part of the consolidated financial statements.
F-23
GIANT LUXURY HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the financial years ended 30 September 2012, 2011 and 2010
Note
01.10.2011
to
30.09.2012
EUR
01.10.2010
to
30.09.2011
EUR
01.10.2009
To
30.09.2010
EUR
Revenue
17
10,889,459
6,856,168
2,834,277
Cost of sales
18
(5,763,413)
(4,172,300)
(1,527,179)
5,126,046
2,683,868
1,307,098
Gross profit
Other income
Selling and distribution costs
Administrative and other expenses
Finance costs
19
20
21
22
18,629
(2,488,344)
(1,332,448)
(47,233)
208
(1,728,014)
(437,564)
(3,511)
9
(1,072,665)
(153,817)
(1,618)
Profit before tax
23
1,276,650
514,987
79,007
Income tax
16
(221,403)
(114,829)
(16,840)
Net profit for the financial year
1,055,247
400,158
62,167
Other comprehensive income:
Exchange differences arising on translation
of foreign operations
73,275
9,496
2,287
1,128,522
409,654
64,454
0.20
0.20
400,158
400,158
62,167
62,167
Total comprehensive income for the financial
year
Earnings per share:
Basic
Diluted
25
25
The comparability is affected by movements in the relative value of the functional currency (Hong
Kong Dollars or HK$) compared to the presentation currency (Euro or EUR).
The accompanying notes form an integral part of the consolidated financial statements.
F-24
GIANT LUXURY HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the financial years ended 30 September 2012, 2011 and 2010
Distributable
Share
capital
EUR
Retained
earnings
EUR
Nondistributable
Translation
reserve
EUR
As at 1 October 2009
1
35,575
(2,485)
33,091
Net profit for the year
-
62,167
-
62,167
Exchange difference arising on
translation of foreign operations
-
-
2,287
2,287
Total comprehensive income for the
year
-
62,167
2,287
64,454
As at 30 September 2010
1
97,742
(198)
97,545
Net profit for the year
-
400,158
-
400,158
Exchange difference arising on
translation of foreign operations
-
-
9,496
9,496
Total comprehensive income for the
year
-
400,158
9,496
409,654
As at 30 September 2011
1
497,900
9,298
507,199
Net profit for the year
-
1,055,247
-
1,055,247
Exchange difference arising on
translation of foreign operations
Total comprehensive income for the
year
Total
equity
EUR
-
-
73,275
73,275
-
1,055,247
73,275
1,128,522
Issuance of ordinary shares
502,889
-
-
502,889
As at 30 September 2012
502,890
1,553,147
82,573
2,138,610
The accompanying notes form an integral part of the consolidated financial statements.
F-25
GIANT LUXURY HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the financial years ended 30 September 2012, 2011 and 2010
Note
2012
EUR
2011
EUR
2010
EUR
Cash flows from operating activities
Profit before tax
1,276,650
514,987
79,007
Adjustments for:
Finance cost paid
Interest income recognised in profit or loss
Gain on disposal of plant and equipment
Depreciation of plant and equipment
47,233
(8,844)
(5,426)
76,144
3,511
(10)
55,765
1,618
(9)
35,401
1,385,757
574,253
116,017
(1,302,587
)
(2,402,934
)
244,678
(1,146,869)
(671,234)
(340,943)
38,979
1,061,014
627,331
Cash (used in)/generated from operation
(2,075,086
)
147,455
111,093
Hong Kong Profits Tax paid
Net cash (used in)/generated from
operating activities
(11,129)
(2,086,215
)
147,455
111,093
Cash flows from investing activities
Interest received
Purchase of plant and equipment
8,844
(143,542)
10
(137,348)
9
(77,730)
Net cash used in investing activities
(134,698)
(137,338)
(77,721)
(47,233)
(83,622)
2,159,639
(576,416)
235,769
(3,511)
(8,974)
-
(1,618)
16,184
-
801,707
(7,180)
41,314
(3,597)
12,232
(1,127)
Net cash generated from financing
activities
2,482,664
25,232
25,671
Net increase in cash and cash equivalents
261,751
35,349
59,043
Cash and cash equivalents at beginning
of the year
210,153
174,623
108,037
Effect of foreign exchange rate changes
16,432
181
7,543
Changes in operating assets and liabilities:
Increase in inventories
(Increase)/decrease in trade and other
receivables
Increase in trade and other payables
Cash flows from financing activities
Interest paid
Repayment to bank borrowings
Proceed from bank borrowings
Loan to a director
Advances from ultimate holding company,
net
Advances from related parties
Repayment of finance lease
F-26
Cash and cash equivalents at end of the
year
11
Analysis of the balance of cash and cash
equivalents:
Cash and bank balances
Bank overdrafts
488,336
210,153
174,623
491,654
(3,318)
220,990
(10,837)
184,123
(9,500)
488,336
210,153
174,623
The accompanying notes form an integral part of the consolidated financial statements.
F-27
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
1.
GENERAL
Giant Luxury Holdings Limited (“the Company”) is incorporated in Hong Kong with limited liability. The
address of the registered office is 14/F., No. 80 Gloucester Road, Wan Chai, Hong Kong.
The consolidated financial statements are presented in Euro (“EUR”), unless otherwise stated. The
functional currency of the Company and its subsidiaries (hereinafter collectively referred to as the
“Group”) is Hong Kong Dollars (“HK$”).
The Company is an investment holding company. The principal activities of its subsidiaries are set out
in note 8 to the consolidated financial statements.
2.
BASIS OF PREPARATION
The consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRSs”) as issued by the International Accounting Standards Board (“IASB”).
The consolidated financial statements have been prepared under the historical cost convention basis,
except as disclosed in the accounting policies below.
The preparation of consolidated financial statements in conformity with IFRSs requires the use of
certain critical accounting estimates. It also requires management to exercise its judgment and
assumptions in the process of applying its accounting policies. The areas involving a higher degree of
judgment or complexity, or areas where assumptions and estimates are significant to the consolidated
financial statements are disclosed in note 5.
3.
APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING
STANDARDS (“IFRSs”)
In the current financial year, the Group has adopted all the new and revised IFRS and IFRIC
Interpretations that are relevant to its operations and effective for the current financial year. The
adoption of these new/revised IFRSs and IFRIC Interpretations has no material effect on the
consolidated financial statements.
New and Revised IFRSs and IFRIC Interpretations
The Group has not applied the following new and revised IFRSs that have been issued but are not yet
effective.
Forthcoming requirements
IAS 19 Employee Benefits
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IAS 27 Separate Financial Statements (revised 2011)
IAS 28 Investments in Associates and Joint Ventures (revised in 2011)
IFRIC 20 Stripping costs in the production phase of a surface mine
Annual improvements to IFRSs
Amendment to IAS 32, Financial instruments: Presentation
IFRS 9 Financial Instruments
Effective date
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2014
1 January 2015
The director of the Company and the Group anticipates that the application of the other new and
revised standards, amendments or interpretations will have no material impact on the consolidated
financial statements.
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
4.1 Basis of consolidation
Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to
govern the financial and operating policies generally accompanying a shareholding of more than one
half of the voting rights. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases.
F-28
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
The Group uses the acquisition method of accounting to account for business combinations. The
consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred,
the liabilities incurred and the equity interests issued by the Group. The consideration transferred
includes the fair value of any asset or liability resulting from a contingent consideration arrangement.
Acquisitions related costs are expensed as incurred. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at their fair values at
the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling
interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the
acquiree’s net assets.
Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect
changes in consideration arising from contingent consideration amendments.
Cost also includes direct attributable costs of investment. The excess of the consideration transferred,
the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any
previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net
assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the
subsidiary acquired in the case of a bargain purchase, the difference is recognized directly in the
statement of comprehensive income.
Inter-company transactions, balances and unrealized gains on transactions between group companies
are eliminated. Unrealized losses are also eliminated. Accounting policies of subsidiaries have been
changed where necessary to ensure consistency with the policies adopted by the Group.
Transactions with non-controlling interests
The Group treats transactions with non-controlling interests as transactions with equity owners of the
Group. For purchases from non-controlling interests, the difference between any consideration paid
and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in
equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognized in profit or loss. The fair
value is the initial carrying amount for the purposes of subsequently accounting for the retained
interest as an associate, joint venture or financial asset. In addition, any amounts previously
recognized in other comprehensive income in respect of that entity are accounted for as if the Group
had directly disposed of the related assets or liabilities. This may mean that amounts previously
recognized in other comprehensive income are reclassified to profit or loss.
If the ownership interest in an associate is reduced but significant influence is retained, only a
proportionate share of the amounts previously recognised in other comprehensive income are
reclassified to profit or loss where appropriate.
4.2 Segment reporting
An operating segment is a component of the Group that engages in business activities from which it
may earn revenues and incurs expenses, including revenues and expenses that relate to transactions
with other components of the Group. Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker. The chief operating decision-maker
is responsible for allocating resources and assessing performance of the operating segments.
4.3 Foreign currency
(a)
Functional and presentation currency
Items included in the consolidated financial statements of each of the Group’s entities are measured
using the currency of the primary economic environment in which the entity operates (“the functional
currency”). The consolidated financial statements are presented in Euro (“EUR”), which is the Group’s
presentation currency.
(b)
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the translation at yearend exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in the income statement, except when deferred in other comprehensive income as
qualifying cash flow hedges and qualifying net investment hedges.
F-29
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are
presented in the consolidated statement of comprehensive income within “finance income or cost”. All
other foreign exchange gains and losses are presented in the consolidated statement of
comprehensive income within “administrative expense” or “other income”.
Changes in the fair value of monetary securities denominated in foreign currency classified as
available for sale are analysed between translation differences resulting from changes in the
amortised cost of the security and other changes in the carrying amount of the security. Translation
differences in respect of changes in amortised cost are recognised in profit or loss, and other changes
in carrying amount are recognised in other comprehensive income.
Translation differences on non-monetary financial assets and liabilities such as equities held at fair
value through profit or loss are recognised in profit or loss as part of the fair value gain or loss.
Translation differences on non-monetary financial assets, such as equities classified as available for
sale, are included in other comprehensive income.
(c)
Group companies
The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are
translated into the presentation currency as follows:
(i)
assets and liabilities for each balance sheet presented are translated at the closing rate at the
date of that balance sheet;
(ii)
income and expenses for each income statement are translated at average exchange rates
(unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing
on the transaction dates, in which case income and expenses are translated at the rate on the dates of
the transactions); and
(iii)
all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of the net investment in foreign
operations, and of borrowings and other currency instruments designated as hedges of such
investments, are taken to other comprehensive income. When a foreign operation is partially disposed
of or sold, exchange differences that were recorded in equity are recognised in the consolidated
statement of comprehensive income as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets
and liabilities of the foreign entity and translated at the closing rate.
4.4 Plant and equipment
Plant and equipment are initially recognised at cost and subsequently carried at cost less accumulated
depreciation and accumulated impairment loss. The cost of an asset comprises its purchase price and
any directly attributable costs of bringing the asset to working condition for its intended use.
On disposal of an item of plant and equipment, the difference between the net disposal proceeds and
its carrying amount is taken to profit or loss.
Depreciation is calculated using the straight-line method to allocate their depreciable amounts over the
estimated useful lives as follows:
Leasehold improvement
5 years
Furniture and fixture
5 years
Office equipment
3 - 5 years
Motor vehicle
3 years
Fully depreciated plant and equipment are retained in the consolidated financial statements until they
are no longer in use and no further charge for depreciation is made in respect of these assets.
The residual values, useful life and depreciation method are reviewed at the end of each reporting
period to ensure that the amount, method and period of depreciation are consistent with previous
estimates and the expected pattern of consumption of the future economic benefits embodied in the
items of plant and equipment. The effects of any revision are recognized in profit or loss when the
changes arise.
Subsequent expenditure relating to plant and equipment that has already been recognized is added to
carrying amount of the asset only when it is probable that future economic benefits associated with the
item will flow to the Group and the cost of the item can be measured reliably. All other repair and
maintenance expenses are recognized in profit or loss when incurred.
F-30
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
4.5 Impairment of non-financial assets
Non-financial assets that are subject to amortization or depreciation are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. The difference between the carrying amount and the recoverable amount is recognized
as an impairment loss in profit or loss. The recoverable amount is the higher of an asset’s fair value
less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash flows (cash-generating units). Nonfinancial assets other than goodwill that have suffered an impairment are reviewed for possible
reversal of the impairment at each reporting date.
4.6 Financial assets
Financial assets are recognized on the statement of financial position when, and only when, the Group
becomes a party to the contractual provisions of the financial instruments.
(i)
Classification
The Group classifies its financial assets as loans and receivables. The classification depends on the
purpose for which the assets were acquired. Management determines the classification of its financial
assets at initial recognition.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. They are presented as current assets, except for those maturing
later than twelve months after the end of the reporting period which are presented as non-current
assets. Loans and receivables are presented as “trade and other receivables” and “cash and cash
equivalents” on the statement of financial position.
(ii)
Recognition and de-recognition
Purchases and sales of financial assets are recognized and derecognized on trade dates – the dates
on which the Group commits to purchase or sell the assets.
Financial assets are derecognized when the rights to receive cash flows from the financial assets have
expired or have been transferred and the Group has transferred substantially all risks and rewards of
ownership. On disposal of a financial asset, the difference between the carrying amount and the sale
proceeds is recognized in profit or loss.
(iii)
Initial measurement
Loans and receivables are initially recognized at fair value plus transaction costs.
(iv) Subsequent measurement
Loans and receivables are subsequently carried at amortized cost using the effective interest method,
less any impairment.
(v)
Impairment of financial assets
The Group assesses at the end of each reporting period whether there is objective evidence that a
financial asset or a group of financial assets is impaired and recognizes an allowance for impairment
when such evidence exists.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy, and
default or significant delay in payments are objective evidence that these financial assets are
impaired.
The carrying amount of these assets is reduced through the use of an impairment allowance account
which is calculated as the difference between the carrying amount and the present value of estimated
future cash flows, discounted at the original effective interest rate. When the asset becomes
uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts
previously written off are recognized against the same line item in profit or loss.
The allowance for impairment loss account is reduced through profit or loss in a subsequent period
when the amount of impairment loss decreases and the related decrease can be objectively
measured. The carrying amount of the asset previously impaired is increased to the extent that the
new carrying amount does not exceed the amortized cost, had no impairment been recognized in prior
periods.
F-31
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
4.7 Financial liabilities
Financial liabilities are recognized on the statement of financial position when, and only when, the
Group becomes a party to the contractual provisions of the financial instrument.
Financial liabilities are recognized initially at fair value, plus, in the case of financial liabilities other
than derivatives, directly attributable transaction costs.
Subsequent to initial recognition, financial liabilities are measured at amortized cost using the effective
interest method.
For financial liabilities, gains and losses are recognized in profit or loss when the liabilities are
derecognized, and through the amortization process. A financial liability is derecognized when the
obligation under the liability is extinguished.
4.8 Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined using the
weighted average method and comprises design costs, raw materials, direct labor, other direct costs
and other costs incurred in bringing the inventories to their present location and condition. Net
realisable value is the estimated selling price in the ordinary course of business less the estimated
costs of completion and the estimated costs necessary to make the sale.
4.9 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets,
which are assets that necessarily take a substantial period of time to get ready for their intended use
or sale are added to the cost of those assets until such time as the assets are substantially ready for
their intended use or sale. Investment income earned on the temporary investment of specific
borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs
eligible for capitalization.
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
4.10 Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods in
the ordinary course of the Group’s activities. Revenue is shown net of rebates and discounts, and after
eliminating sales within the Group.
The Group recognizes revenue when the amount of revenue and related cost can be reliably
measured, it is probable that future economic will flow to the entity and when specific criteria have
been met for each of the Group’s activities as described below. The amount of revenue is not
considered to be reliably measurable until all contingencies relating to the sale have been resolved.
The Group bases its estimates on historical results, taking into consideration the type of customer, the
type of transaction and the specifics of each arrangement.
(i)
Product sales
Revenue from product sales is recognized on the transfer of risks and rewards of ownership, which
generally coincides with the delivery of goods to customers and the passing of title to customers.
(ii)
Interest income
Interest income is recognized as it accrues using the effective interest method.
4.11 Income tax
Income tax expense for the year comprises current and deferred tax. Tax is recognized in the income
statement, except to the extent that it relates to items recognized in other comprehensive income or
directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in
equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the balance sheet date in the countries where the company and its subsidiaries operate
and generate taxable income. Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
F-32
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
Deferred income tax is recognized, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial
statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition
of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or
liability in a transaction other than a business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantially enacted by the balance sheet date and are expected to
apply when the related deferred income tax asset is realized or the deferred income tax liability is
settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilized.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities and when the deferred income taxes assets and
liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity
or different taxable entities where there is an intention to settle the balances on a net basis.
4.12 Provisions
Provisions are recognized for liabilities of uncertain timing or amount when the Group or the Company
has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of
economic benefits will be required to settle the obligation and the amount can been reliably estimated.
Where the time value of money is material, provisions are stated at the present value of the
expenditure expected to settle the obligation.
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be
reliably estimated, the obligation is disclosed as a contingent liability, unless the probability of outflow
is remote. Possible obligations, whose existence will only be confirmed by the occurrence or nonoccurrence of one or more future events, are also disclosed as contingent liabilities unless the
probability of outflow of economic benefits is remote.
4.13 Employee benefit
These comprise short-term employee benefits and contributions to defined contribution retirement
plan.
Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans
and the cost of non-monetary benefits are accrued in the period in which the associated services are
rendered by employees. Where payment or settlement is deferred and the effect would be material,
these amounts are stated at their present values.
4.14 Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
The Company and the Group as lessee –
Assets held under finance leases are recognized as assets of the Company and the Group at their fair
value at the inception of the lease or, if lower, at the present value of the minimum lease payments.
The corresponding liability to the lessor is included in the statement of financial position as a finance
lease obligation. Lease payments are apportioned between finance charges and reduction of the lease
obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance
charges are charged directly to profit or loss.
Operating lease payments are recognized as an expense on a straight-line basis over the term of the
relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are
recognized as a reduction of rental expense over the lease term on a straight-line basis.
5.
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY
In the application of the Group’s accounting policies, which are described in note 4, the director of the
Group is required to make judgments, estimates and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent from other sources. The estimates and associated
F-33
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
assumptions are based on historical experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period in which the estimate is revised if the revised if the
revision affects only that period, or in the period of the revision and future periods if the revision affects
both current and future periods.
(a)
Critical judgments in applying the entity’s accounting policies
The following are the critical judgments, apart from those involving estimations (see below), that the
director has made in the process of applying the entity’s accounting policies and that have the most
significant effect on the amounts recognized in the consolidated financial statements.
(i)
Depreciation of plant and equipment
The management reviews the estimated useful lives of the assets regularly in order to determine the
amount of depreciation charge for the year. The useful lives are based on the Group’s historical
experience with similar assets and taking into account anticipated technological changes, which are
consistent with the common life expectancies applied in Hong Kong. The depreciation charge for
future periods are adjusted if there are significant changes from previous estimates.
(b)
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the end
of the reporting periods, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year, are:
(i)
Income tax
The Company and its subsidiaries are subject to Hong Kong profits tax and significant judgment is
required in determining the provision for income taxes. During the ordinary course of business, there
are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the
Group recognizes tax liabilities based on estimates of whether additional taxes and interest will be
due. These tax liabilities are recognized when, despite the Group believes that its subsidiaries’ tax
return positions are supportable, the Group believes that certain positions are likely to be challenged
and may not be fully sustained upon review by tax authorities. The Group believes that its accruals for
tax liabilities are adequate for all open audit years based on its assessment of many factors including
past experience and interpretations of tax law. This assessment relies on estimates and assumptions
and may involve a series of complex judgments about future events. To the extent that the final tax
outcome of these matters is different than the amounts recorded, such differences will impact income
tax expense in the period in which such determination is made.
6.
FINANCIAL INSTRUMENTS
(a)
Categories of financial instruments
Financial assets at amortised cost:
Loans and receivables (including cash and
bank balances)
- Trade and other receivables
- Amount due from ultimate holding
company
- Loan to a director
- Cash and cash equivalents
Financial liabilities:
- Bank overdrafts
- Trade and other payables
30.09.2012
EUR
30.09.2011
EUR
30.09.2010
EUR
3,202,463
724,688
-
234,351
-
292,750
583,401
491,654
220,990
184,123
3,318
2,337,159
10,837
1,965,506
9,500
881,800
F-34
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
- Amounts due to related parties
- Bank borrowings
- Obligation under finance lease
1,622,893
2,108,524
52,031
763,310
6,915
12,167
581,382
16,175
15,917
(b)
Financial risk management objectives and policies
The Group’s major financial instruments include borrowings, trade and other receivables and trade
and other payables. Details of these financial instruments are disclosed in the respective notes. The
risks associated with these financial instruments include currency risk, interest rate risk, credit risk and
liquidity risk. The policies on how to mitigate these risks are set out below. The management manages
and monitors these exposures to ensure appropriate measures are implemented in a timely and
effective manner.
(i)
Market risk
(1)
Currency risk
Certain entities in the Group have foreign currency transactions and have foreign currency
denominated monetary assets and liabilities, which expose the Group to foreign currency risk.
The Group has foreign currency transactions, which expose the Group to foreign currency risk.
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary
liabilities, mainly represented by trade and other receivables, loan to a director, amount due from
ultimate holding company, cash and bank balances, trade and other payables, income tax payable
and borrowings, at the end of the reporting period are as follows:
HKD
Assets
2012
2011
2010
Liabilities
2012
2011
2010
4,570,
268
945,67
8
418,47
4
6,482,2
56
2,895,
609
1,524,
060
The Group currently does not have any policy on hedges of foreign currency risk. However,
management monitors the foreign currency risk exposure and will consider hedging significant foreign
currency risk should the need arise.
Sensitivity analysis
The following table details the Group’s sensitivity to a 5% increase and decrease in EUR against the
relevant foreign currencies and all other variables were held constant. 5% (2011 and 2010: 5%) is the
sensitivity rate used when reporting foreign currency risk internally to key management personnel and
represents management’s assessment of the reasonably possible change in foreign exchange rates.
The sensitivity analysis includes only outstanding foreign currencies denominated monetary items and
adjusts their translation at the reporting year end for a 5% (2011 and 2010: 5%) change in foreign
currency rates. A positive/(negative) number indicates an increase/(decrease) in post-tax profit for the
year when EUR strengthens 5% (2011 and 2010: 5%) against the relevant foreign currencies. For a
5% (2011 and 2010: 5%) weakening of EUR against the relevant currency, there would be an equal
but opposite impact on the post-tax profit for the year.
HKD
Post-tax profit for the year
30.09.2012
EUR
30.09.2011
EUR
30.09.2010
EUR
46,937
81,410
46,158
(2)
Interest rate risk
The Group is exposed to fair value interest rate risk in relation to fixed rate bank deposits and
borrowings at fixed rates. The Group is exposed to cash flow interest rate risk due to fluctuation of the
prevailing market interest rate on certain bank borrowings and finance lease which carry at prevailing
market interest rates as shown in notes 13 and 14. The Group currently does not have an interest rate
hedging policy. However, management monitors interest rate exposure and will consider hedging
significant interest rate exposure should the need arises.
F-35
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
The Group’s exposures to interest rates on financial liabilities are detailed in the liquidity risk
management section of this note.
Sensitivity analysis
The sensitivity analysis below has been determined based on the change in interest rates and the
exposure to interest rates for the non-derivative financial liabilities at the balance sheet date and on
the assumption that the amount outstanding at the balance sheet date was outstanding for the whole
period or year and held constant throughout the financial period or year. The 25 basis points increase
or decrease represents management’s assessment of a reasonably possible change in interest rates
over the period until the next annual balance sheet date. The analysis is performed on the same basis
for the financial years of 2012, 2011 and 2010.
For the year ended 30 September 2012, if interest rates has been 25 basis points higher/lower, with all
other variables held constant, the Group’s post-tax profit for the financial year would
decrease/increase by approximately EUR5,735 (2011: EUR64 and 2010: EUR28).
(ii)
Credit risk
As of 30 September 2012, the Group’s maximum exposure to credit risk in the event of the
counterparties’ failure to perform their obligations in relation to each class of recognized financial
assets is the carrying amount of those assets as stated in the consolidated statement of financial
position.
The Group’s credit risk is primarily attributable to its trade and other receivables. In order to minimize
the credit risk, the management of the Group has a credit policy in place and the exposures to these
credit risks are monitored on an ongoing basis. Credit evaluations of its customers’ financial position
and condition are performed on each and every major customer periodically. These evaluations focus
on the customer’s past history of making payments when due and current ability to pay, and take into
account information specific to the customer as well as pertaining to the economic environment in
which the customer operates. Debts are usually due within 90 days from the date of billing.
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each
customer. The default risk of the industry and country in which customers operate also has an
influence on credit risk. Apart the largest customer of the Group (see note 17), the Group had no
significant concentrations of credit risk where individual trade and other receivables balance exceed
10% of the total trade and other receivables at the balance sheet date.
The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings
assigned by international credit rating agencies. Also, the Group has no significant concentration of
credit risk, with exposure spread over a number of counterparties and customers.
Further quantitative disclosures in respect of the Group’s exposure to credit risk arising from trade and
other receivables are set out in note 10.
(iii)
Liquidity risk
In managing the liquidity risk, the Group’s policy is to regularly monitor and maintain an adequate level
of cash and cash equivalents determined by management to finance the Group’s operations.
Management also needs to ensure the continuity of funding for both the short and long terms, and to
mitigate the effects of cash flow fluctuation. As of 30 September 2012, the Group has the aggregate
banking facilities approximately EUR2,228,489 (2011: EUR18,862, and 2010: EUR18,937).
The following table details the contractual maturities of the Group’s financial liabilities at the balance
sheet date, which is based on the undiscounted cash flows and the earliest date on which the Group
can be required to pay. The table includes both interest and principal cash flows.
F-36
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
30.09.2012 Non-derivative financial liabilities:
Bank overdrafts
Trade and other
payables
Amounts due to
related parties
Bank
borrowings
Obligation
under finance
lease
Weighted
average
Within
1 year
effective
interest
rate
%
or on
demand
More than More than More
1 year but 2 years
but
less than less than than
2 years
5 years
5 years
EUR
EUR
5%
-
Carrying
amount at
30
Total
undiscounted September
cash flow
2012
EUR
EUR
EUR
EUR
3,318
2,337,159 -
-
-
3,318
2,337,159
3,318
2,337,159
1,622,893 -
-
-
1,622,893
1,622,893
3% - 6.5% 1,022,853 254,836
547,756
573,707
2,399,152
2,108,524
7.47%
26,240
-
59,386
52,031
573,996
573,707
6,421,908
6,123,925
16,573
16,573
5,002,796 271,409
30.09.2011 Non-derivative financial liabilities:
Bank
overdrafts
Trade and
other
payables
Amounts
due to
related
parties
Bank
borrowings
Obligation
under
finance
lease
Weighted
Within
average
1 year
effective
or on
interest rate
demand
less
than
2 years
%
EUR
EUR
5%
More
than
1 year
but
More
than
2
years
but
less
than
5
years
EUR
Carrying
Total
amount at
undisco
unted
cash
flow
EUR
30
September
2011
10,837
-
-
10,837
10,837
-
1,965,5
06
-
-
1,965,5
06
1,965,506
-
763,310
-
-
763,310
763,310
7.8%
7,268
-
-
7,268
6,915
5.75%
5,221
5,221
3,479
13,921
12,167
2,752,1
42
5,221
3,479
2,760,8
42
2,758,735
30.09.2010 Non-derivative financial liabilities:
Weighte
d
average
EUR
Within
1 year
More
than
1 year
but
More
than
2 years
but
F-37
Carrying
Total
amount at
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
Bank
overdrafts
Trade and
other
payables
Amounts
due to
related
parties
Bank
borrowings
Obligation
under
finance
lease
effective
or on
less than
less than
undiscou
nted
interest
rate
%
demand
2 years
5 years
cash flow
30
Septembe
r
2010
EUR
EUR
EUR
EUR
EUR
5%
9,500
-
-
9,500
9,500
-
881,800
-
-
881,800
881,800
-
581,382
-
-
581,382
581,382
7.8%
10,945
7,297
-
18,242
16,175
5.75%
5,241
5,241
8,737
19,219
15,917
1,488,868
12,538
8,737
1,510,143
1,504,774
(c)
Fair value
The fair values of financial assets and financial liabilities are determined in accordance with generally
accepted pricing models based on discounted cash flow analysis.
The director of the Company considers that the carrying amounts of financial assets and financial
liabilities recorded at amortized cost in the consolidated financial statements approximate to their fair
values.
(d)
Capital risk management
The Company’s objectives when managing capital are to safeguard its ability to continue as a going
concern in order to provide returns for shareholders and maintain an optimal capital structure to
reduce the cost of capital.
In order to maintain its capital structure, the Company may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.
The Company actively and regularly monitors capital on the basis of the net debt-to-adjusted capital
ratio. This ratio is calculated by dividing the total borrowings (including current and non- current) as
shown in the consolidated financial statement less cash and cash equivalents by the total equity as
shown in the consolidated financial statements
During the year ended 30 September 2012, the Company’s strategy, which was unchanged from 2010
and 2011 was to improve the net debt-to-adjusted capital ratio as low as feasible. In order to improve
or adjust the ratio, the Company did not pay any dividends, did not return capital to shareholders, and
issued capital stock to strengthen the equity base. In addition the Company’s growth of net income
effectively reduced the ratio. The Company also managed its debt in relation to the revenue and net
income.
Neither the Company nor any of its subsidiary undertakings are subject to externally imposed capital
requirements.
The net debt-to-adjusted capital ratios of the Group at the end of the reporting period were as follows:
Current liabilities
Bank overdrafts
Trade and other payables
Amounts due to related parties
Income tax payable
Long-term bank borrowings
30.09.2012
EUR
30.09.2011
EUR
30.09.2010
EUR
3,318
2,337,159
1,622,893
358,331
958,665
10,837
1,965,506
763,310
136,874
6,915
9,500
881,800
581,382
19,286
9,232
F-38
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
Obligation under finance lease
13,074
5,293,440
4,164
2,887,606
3,701
1,504,901
Non-current liabilities
Long-term bank borrowings
Obligation under finance lease
1,149,859
38,957
8,003
6,943
12,216
Total debt
6,482,256
2,895,609
1,524,060
Less: cash and cash equivalents
(491,654)
(220,990)
(184,123)
Net debt
5,990,602
2,674,619
1,339,937
Total equity
2,138,610
507,199
97,545
Net debt-to-adjusted capital ratio
2.80
5.27
13.74
F-39
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
7.
PLANT AND EQUIPMENT
Leasehold
improvem
ent
EUR
Furniture
and fixture
Office
equipment
Motor
vehicle
Total
EUR
EUR
EUR
EUR
47,823
1,202
2,470
-
51,495
Additions
Foreign translation
difference
67,018
3,318
258
83
5,276
170
22,232
(13)
94,784
3,558
As of 30 September 2010
118,159
1,543
7,916
22,219
149,837
Additions
Foreign translation
difference
119,239
2,474
4,086
95
14,023
315
(88)
137,348
2,796
As of 30 September 2011
239,872
5,724
22,254
22,131
289,981
Additions
Disposals
Foreign translation
difference
96,246
16,301
11,383
499
32,347
1,796
60,030
(23,246)
1,842
200,006
(23,246)
20,438
As of 30 September 2012
352,419
17,606
56,397
60,757
487,179
Accumulated depreciation
As of 1 October 2009
8,892
-
56
-
8,948
Charge for the year
Foreign translation
difference
26,819
608
309
-
1,604
3
6,669
(3)
35,401
608
As of 30 September 2010
36,319
309
1,663
6,666
44,957
Charge for the year
Foreign translation
difference
44,122
946
1,117
26
4,047
93
6,479
134
55,765
1,199
As of 30 September 2011
81,387
1,452
5,803
13,279
101,921
Charge for the year
Write back on disposal
Foreign translation
difference
52,893
5,775
2,492
123
7,865
462
12,894
(18,015)
775
76,144
(18,015)
7,135
As of 30 September 2012
140,055
4,067
14,130
8,933
167,185
As of 30 September 2012
212,364
13,539
42,267
51,824
319,994
As of 30 September 2011
158,485
4,272
16,451
8,852
188,060
As of 30 September 2010
81,840
1,234
6,253
15,553
104,880
Cost
As of 1 October 2009
Net book value
All plant and equipment held by the Group are located in Hong Kong. As of 30 September 2012, 2011
and 2010, the net book value of motor vehicle held under finance lease of the Group was EUR51,824,
EUR8,852 and EUR15,553, respectively.
8.
INVESTMENT IN SUBSIDIARY UNDERTAKINGS
F-40
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
Particulars of the Company’s subsidiary undertakings as of 30 September 2012 are set out below:
Name
Place of
Particulars of issued
incorporation and paid-up capital
and operations
Percentageof Principal activities
equity
directly
attributable
to the
Company
Hing Lung
Hong Kong
Medicine Company
Limited
HK$2,000
100%
Operating a sinopharmaceutical
ingredients and medicine
retail shop
Dah Sing Bird Nest Hong Kong
Store Limited
HK$9,000
100%
Operating a sinopharmaceutical
ingredients and medicine
retail shop
Universal
Medicine
Company Limited
Hong Kong
HK$2,500
100%
Operating a sinopharmaceutical
ingredients and
medicine retail shop.
Yue York
Medicine Group
Limited
Hong Kong
HK$2,000
100%
Operating a sinopharmaceutical
ingredients and
medicine retail shop
Giant King
Medicine Limited
Hong Kong
HK$1
100%
Operating a sinopharmaceutical
ingredients and medicine
retail shop
Giant Royal
Medicine Limited
Hong Kong
HK$1
100%
Operating a sinopharmaceutical
ingredients and
medicine retail shop
Giant Top
Medicine Limited
Hong Kong
HK$1
100%
Operating a sinopharmaceutical
ingredients and
medicine retail shop
Giant Ocean
Medicine Limited
Hong Kong
HK$1
100%
Operating a sinopharmaceutical
ingredients and
medicine retail shop
Giant Channel
Medicine Limited
Hong Kong
HK$1
100%
Operating a sinopharmaceutical
ingredients and
medicine retail shop
Giant Emperor
Medicine Limited
Hong Kong
HK$1
100%
Trading of
pharmaceutical
ingredients and
medicine
Giant Dragon
(China) Limited
Hong Kong
HK$1
100%
Trading of
pharmaceutical
ingredients and
medicine
GL IIXII Limited
Hong Kong
HK$1
100%
Trading of
F-41
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
pharmaceutical
ingredients and
medicine
9.
INVENTORIES
Finished goods
30.09.2012
EUR
30.09.2011
EUR
30.09.2010
EUR
3,730,604
2,269,070
1,098,251
F-42
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
10.
TRADE AND OTHER RECEIVABLES
Trade receivables
Prepayments
Rental and other deposits
Other receivables
30.09.2012
EUR
30.09.2011
EUR
30.09.2010
EUR
2,594,337
113,197
461,644
33,285
395,860
9,469
319,359
-
75,629
158,722
-
3,202,463
724,688
234,351
All of trade and other receivables are expected to be recovered within one year.
All trade and other receivables are denominated in HK$.
The following is an ageing analysis of trade receivables at the balance sheet date that were past due
but not impaired:
0 to 90 days
91 to 365 days
Over 365 days
30.09.2012
EUR
30.09.2011
EUR
30.09.2010
EUR
1,373,332
1,218,362
2,643
146,998
248,862
-
75,629
-
2,594,337
395,860
75,629
Up to 31 December 2012, the Company has subsequently recovered from approximately 74% of the
accounts receivable as of 30 September 2012.
Receivables that were past due but not impaired relate to a number of independent customers that
have a good track record with the Group. Based on past experience, management believes that no
impairment allowance is necessary in respect of these balances as there has not been a significant
change in credit quality and the balances are still considered fully recoverable. The Group does not
hold any collateral over these balances.
Of the trade receivables balance at the end of the year, EUR 1,090,923 (2011: EUR 226,703, 2010:
EUR 34,648) is due from the Group’s largest customer (see note 17).
F-43
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
11.
CASH AND CASH EQUIVALENTS
30.09.2012
EUR
30.09.2011
EUR
30.09.2010
EUR
Cash and bank balances
Bank overdrafts
491,654
(3,318)
220,990
(10,837)
184,123
(9,500)
Cash and cash equivalents in the
consolidated statement of cash flows
488,336
210,153
174,623
30.09.2012
EUR
30.09.2011
EUR
30.09.2010
EUR
569,309
904
904
502,890
1
1
Cash and cash equivalents are denominated in HK$.
12.
SHARE CAPITAL
Authorized:
6,000,000 ordinary shares (2011 and
2010: 10,000 ordinary shares) of HK$1
each
Issued and fully paid :
5,300,000 ordinary shares (2011 and
2010: 1 ordinary share) of HK$1 each
The Company has one class of ordinary shares.
On 11 October 2011, the Company approved an amendment to the Memorandum and Articles of
Association to increase the number of authorized ordinary shares of HK$1 par value from 10,000 to
5,300,000 ordinary shares. Concurrently, the Company issued 5,299,999 ordinary shares at par value
of HK$1 to its former shareholder, Giant Luxury (UK) PLC.
On 23 April 2012, the Company approved an amendment to the Memorandum and Articles of
Association to increase the number of authorized ordinary shares of HK$1 par value from 5,300,000 to
6,000,000 ordinary shares.
On 4 May 2012, the Company’s former shareholder, Giant Luxury (UK) PLC transferred all of its equity
interest to Giant Luxury Limited.
Subsequently, on 6 December 2012, the Company’s former shareholder, Giant Luxury Limited
transferred all of its equity interest to Pacific Retail Merchants AG.
F-44
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
13.
BANK BORROWINGS
30.09.2012
EUR
30.09.2011
EUR
30.09.2010
EUR
(a)
759,397
-
-
Long-term bank loan, secured
- Repayable in May 2012
- Repayable in March 2017
(b)
(a)
685,518
6,915
-
16,175
-
Mortgage loan, secured, repayable in
March 2032
-
-
(a)
583,401
Short-term bank loan, secured and
repayable within twelve months
Installment loan, repayable in September (c)
2014
80,208
2,108,524
Less: current-portion of bank
borrowings
(958,665)
Bank borrowings, non-current
1,149,859
-
6,915
(6,915)
16,175
(9,232)
-
6,943
(a)
The bank loans carried interest at rates ranging from 3% to 6.5% per annum and were
guaranteed by Mr. Wong Wai Keung, a director of the Company’s subsidiaries, and Mr. Chung Wing
Chin, a director of the Company and Ms. Ma Fong, the spouse of Mr. Chung Wing Chin. All the bank
borrowings were secured by the properties owned by Mr. Wong Wai Keung, Mr. Chung Wing Chin and
Ms. Ma Fong.
(b)
The bank loans carried interest at 7.8% per annum (2011: 7.8%) and were guaranteed by Mr.
Wong Wai Keung, a director of the Company’s subsidiaries, and Mr. Chung Wing Chin, a director of
the Company. The bank loans are fully repaid upon maturity.
The bank loan carried interest at 4.5% per annum and was guaranteed by Mr. Wong Wai Keung, a
director of the Company’s subsidiaries, and Mr. Chung Wing Chin, a director of the Company.
All of the bank borrowings are denominated in HK$.
F-45
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
14.
OBLIGATION UNDER FINANCE LEASE
As of 30 September 2012, 2011 and 2010, the Group had obligation under finance lease repayable as
follows:
Minimum lease payment
Present value of the minimum
lease payment
30.09.
30.09.
30.09.
30.09.
30.09.
30.09.
2012
2011
2010
2012
2011
2010
EUR
EUR
EUR
EUR
EUR
EUR
Within one year
Between two to five
years
16,573
42,813
5,220
8,701
5,242
13,977
13,074
38,957
4,164
8,003
3,701
12,216
Total minimum finance
lease payments
59,386
13,921
19,219
52,031
12,167
15,917
Less: future finance
charges
(7,355
)
(1,754)
(3,302)
Present value of lease
obligation
52,031
12,167
15,917
15.
TRADE AND OTHER PAYABLES
Trade payables
Accruals and other payables
30.09.2012
EUR
30.09.2011
EUR
30.09.2010
EUR
2,035,497
301,662
1,802,096
163,410
840,736
41,064
2,337,159
1,965,506
881,800
All trade and other payables are denominated in HK$.
16.
INCOME TAX
(a)
Income tax payable in the consolidated statements of financial position represents:
Hong Kong Profits Tax
(b)
30.09.2012
EUR
30.09.2011
EUR
30.09.2010
EUR
358,331
136,874
19,286
Income tax expense in the consolidated statements of comprehensive income represents:
01.10.2011
to
30.09.2012
EUR
01.10.2010
to
30.09.2011
EUR
01.10.2009
to
30.09.2010
EUR
Current tax – Hong Kong Profits Tax
221,403
114,829
16,840
Reconciliation between income tax expense and accounting profit at the applicable tax rates:
01.10.2011
to
30.09.2012
F-46
01.10.2010
to
30.09.2011
01.10.2009
to
30.09.2010
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
Profit before tax
Notional tax on profit before tax, calculated at
the rates applicable in the tax jurisdictions
concerned
Tax effect of non-taxable income
Tax effect of non-deductible items
Tax effect of temporary differences
Utilisation of tax losses
Tax losses not recognised as deferred tax
assets
Under-provision in prior year
Income tax expense
EUR
EUR
EUR
1,276,650
514,987
79,007
210,648
(901)
9,638
4,409
(9,069)
84,973
(2)
88
4,938
-
13,036
(2)
432
3,374
-
5,860
818
24,832
-
-
221,403
114,829
16,840
No provision for deferred tax assets and liabilities has been made in the consolidated financial
statements as the tax effect of temporary differences is immaterial to the Group.
17.
REVENUE
Revenue is generated from the sale of sino-pharmaceutical ingredients and medicine products in
Hong Kong.
The largest customer accounted for 15%, 6% and 3% of the Group’s total revenues for the years
ended 30 September 2012, 2011 and 2010, respectively.
The top 10 customers accounted for 38%, 15% and 8% of the Group’s total revenues for the years
ended 30 September 2012, 2011 and 2010, respectively.
F-47
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
18.
COST OF SALES
Cost of inventories sold
Freight charges
Direct labour
19.
01.10.2010
to
30.09.2011
EUR
01.10.2009
to
30.09.2010
EUR
5,703,666
56,979
2,768
4,148,648
22,748
904
1,515,612
6,465
5,102
5,763,413
4,172,300
1,527,179
01.10.2011
to
30.09.2012
EUR
01.10.2010
to
30.09.2011
EUR
01.10.2009
to
30.09.2010
EUR
32
8,812
9,785
10
198
9
-
18,629
208
9
01.10.2011
to
30.09.2012
EUR
01.10.2010
to
30.09.2011
EUR
01.10.2009
to
30.09.2010
EUR
15,466
12,085
965
72,677
74,504
10,552
942
42,339
11,384
1,244,327
1,003,103
703
4,276
1,199
5,485
55,765
51,968
10,645
1,344
20,248
3,327
966,090
606,964
138
625
650
11,369
35,401
33,572
6,587
566
4,940
9,435
639,363
330,019
2,488,344
1,728,014
1,072,665
OTHER INCOME
Interest income
Interest income on loan to a director
Sundry income
20.
01.10.2011
to
30.09.2012
EUR
SELLING AND DISTRIBUTION COSTS
Advertising expense
Building management fee
Cleaning fee
Commission
Depreciation
Electricity and water
Insurance cost
License expense
Pension scheme contribution
Packing expense
Rents and rates
Salaries
21. ADMINISTRATIVE AND OTHER EXPENSES
Administrative and other expenses comprise, among others, personnel cost for management and
other administrative functions, depreciation of office equipment, travel and entertainment expense,
legal and professional cost, other miscellaneous expenses incurred for administrative purposes.
22.
FINANCE COSTS
01.10.2011
F-48
01.10.2010
01.10.2009
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
Interest on bank overdrafts
Interest on bank loans wholly repayable
within five years
Finance charge on obligation under
finance lease
to
30.09.2012
EUR
to
30.09.2011
EUR
to
30.09.2010
EUR
43
44,805
348
1,665
886
111
2,385
1,498
621
47,233
3,511
1,618
01.10.2011
to
30.09.2012
EUR
01.10.2010
to
30.09.2011
EUR
01.10.2009
to
30.09.2010
EUR
5,703,666
4,148,648
1,515,612
76,144
101,338
1,308,992
55,765
27,611
966,090
35,401
7,105
639,363
1,647,566
48,561
1,696,127
730,991
20,248
751,239
427,145
4,940
432,085
01.10.2011
to
30.09.2012
EUR
01.10.2010
to
30.09.2011
EUR
01.10.2009
to
30.09.2010
EUR
-
-
-
79,247
892
29,682
782
37,043
568
80,139
30,464
37,611
23. PROFIT BEFORE TAX
Profit before tax is stated at after charging:
Cost of inventories recognised as
expenses
Depreciation
Auditor’s remuneration
Operating lease charges
Staff costs (including director’s
remuneration)
Wages and salaries
Pension scheme contributions
24.
DIRECTOR’S REMUNERATION
Director’s remuneration for the year is disclosed as follows:
Director’s fees
Other emoluments:
Salaries, bonuses and allowances
Pension scheme contributions
25. EARNINGS PER SHARE
The calculation of basic earnings per share is based on the net income attributable to the equity
holders of the Company for the financial year ended 30 September 2012 of EUR 0.20 (2011: EUR
400,158 and 2010: EUR 62,167) and the weighted average number of 5,154,795 (2011 and 2010: 1)
ordinary shares in issue during the year.
There were no potential dilutive instruments at either financial year end.
F-49
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
26. DIVIDEND
No dividend has been declared or paid for the financial years ended 30 September 2012, 2011 and
2010.
27.
OPERATING LEASE COMMITMENTS
At the balance sheet date, the total future minimum lease payments under non-cancelable operating
leases for the shops and office premises are payable as follows:
Within one year
Between two to five years
30.09.2012
EUR
30.09.2011
EUR
30.09.2010
EUR
1,543,918
1,331,002
878,501
539,404
673,787
292,775
2,874,920
1,417,905
966,562
F-50
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
28.
RELATED PARTY TRANSACTIONS
Compensation of key management personnel
The remuneration of the key management of the Group during the year was as follows:-
Salaries, bonus and allowances
01.10.2011
to
30.09.2012
EUR
01.10.2010
to
30.09.2011
EUR
01.10.2009
to
30.09.2010
EUR
333,112
106,547
95,519
The remuneration of key management personnel comprises the remuneration of Executive Director
and key executives.
Transactions with related parties
Sales of goods to a related party
Interest income received from a
director
(i)
(ii)
01.10.2011
to
30.09.2012
EUR
01.10.2010
to
30.09.2011
EUR
01.10.2009
to
30.09.2010
EUR
8,812
83,907
-
32,369
-
Sales of goods to a related party which is controlled by the director of the Company, Mr. Chung Wing
Chin, were transacted at the current market value in the normal course of business.
Interest income was charged on the loan to a director at the interest rate equal to mortgage loan of 3%
per annum (see Note 13 (a)).
F-51
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
Balance with related parties
Representing:
Amount due to a former shareholder of
a subsidiary
Amount due to a director
Total:
30.09.2012
EUR
30.09.2011
EUR
30.09.2010
EUR
(iii)
-
-
28,401
(iv)
1,622,893
763,310
552,981
1,622,893
763,310
581,382
At 30 September 2010, amount due to a former shareholder of the Company’s subsidiary represented
the temporary advances from Mr. Wong Hon Leong, a former shareholder of Universal Medicine
Company Limited, which is interest-free, unsecured and repayable on demand.
At 30 September 2012, 2011 and 2010, amount due to a director represented the temporary advances
from Mr. Chung Wing Chin, a director of the Company, which is interest-free, unsecured and has no
fixed term of repayment.
Loan to a director
30.09.2012
EUR
30.09.2011
EUR
30.09.2010
EUR
Loan to a director
Less: current-portion
583,401
(22,354)
-
-
Non–current portion
561,047
-
-
The loan to a director carries interest at 3% per annum, unsecured and is repayable by monthly
installment due in March 2032.
Amount due from ultimate holding company
As of 30 September 2012, the amount due from ultimate holding company was unsecured, interest
free and repayable on demand.
Apart from the transactions disclosed above and elsewhere in the consolidated financial statements,
the Group had no other material transactions with related parties during the financial years.
F-52
GIANT LUXURY HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial years ended 30 September 2012, 2011 and 2010
29. SEGMENT INFORMATION
An analysis of segment information by business segment is presented as follows:
Revenue from:
- Wholesale business
- Retail business
01.10.2011
to
30.09.2012
EUR
01.10.2010
to
30.09.2011
EUR
01.10.2009
to
30.09.2010
EUR
4,343,385
6,546,074
1,357,021
5,499,147
471,240
2,363,037
10,889,459
6,856,168
2,834,277
30. ULTIMATE CONTROLLING PARTY
At the date of the consolidated financial statements, the director considers the ultimate controlling
party of the Company is to be Pacific Retail Merchants AG, which is incorporated in Munich, Germany.
31. EVENTS AFTER THE REPORTING PERIOD
Subsequently, on 6 December 2012, the Company’s former shareholder, Giant Luxury Limited
transferred all of its equity interest to Pacific Retail Merchants AG.
32. APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements were approved by the board of director and authorised for issue
on 4 February 2013.
F-53
INDEPENDENT AUDITOR’S REPORT
TO SOLE SHAREHOLDER OF
GIANT LUXURY HOLDINGS LIMITED
(incorporated in Hong Kong with limited liability)
We have audited the accompanying consolidated financial statements of Giant Luxury Holdings
Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”), which comprise
the consolidated statements of financial position as at 30 September 2012, 2011 and 2010, and the
consolidated statements of comprehensive income, changes in equity and cash flows for each of three
years in the period ended 30 September 2012, and a summary of significant accounting policies and
other explanatory information.
Management’s responsibilities for the consolidated financial statements
Management is responsible for the preparation of consolidated financial statements that give a true
and fair view in accordance with International Financial Reporting Standards issued by the
International Accounting Standards Board, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our
audits. We conducted our audits in accordance with International Standards on Auditing. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity’s preparation of consolidated financial statements that give a true
and fair view in order to design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
financial position of Giant Luxury Holdings Limited and its subsidiaries as at 30 September 2012, 2011
and 2010 and of their financial performance and cash flows for each of three years in the period ended
30 September 2012 in accordance with International Financial Reporting Standards.
HKCMCPA Company Limited
Certified Public Accountants
Hong Kong, China
4 February 2013
F-54
F-55
GLOSSARY
Abbreviation
Meaning
AktG
German Stock Corporations Act (Aktiengesetz)
BVI
The British Virgin Islands
CAGR
Financial term for compounded annual growth rate
CEO
Chief Executive Officer (Vorstandsvorsitzender)
CFO
Chief Financial Officer (Finanzvorstand)
CPA
Certified Public Accountant
EBITDA
Earnings before interest, tax, depreciation and amortization
EEA
European Economic Area, comprises the countries of the European Union (EU),
plus Iceland, Liechtenstein and Norway
EUR
EURO
Existing Shareholders
HKD
Hong Kong Dollars
HKTB
The Hong Kong Tourism Board
Giant Luxury BVI
Giant Luxury Limited, British Virgin Islands, a shareholder in PRM and the Seller
of Giant Luxury Hong Kong to PRM.
Giant Luxury
Giant Luxury Limited, Hong Kong, a wholly owned subsidiary of PRM.
IFRS
International Financial Reporting Standards
IPO
Initial Public Offering
New Shares
1,000,000 no par value ordinary bearer shares which emanate from a capital
increase against cash contribution pursuant to a resolution to be adopted by the
extraordinary shareholders’ general meeting (Hauptversammlung)
Offer Shares
Same as New Shares
Offering
The Offering relates to 1,000,000 ordinary bearer shares i.e. New Shares
Operating
Subsidiaries
Those companies of PRM Group that are operating the stores in Hong Kong, i.e.
Hing Lung Medicine”, “Universal Medicine”, “Dah Sing Bird Nest”, “Yue York
Medicine”, “Giant King Medicine”, “Giant Royal Medicine”, “Giant Top
Medicine”, “Giant Ocean Medicine”, “Giant Emperor Medicine”, “Giant Channel
Medicine”, “Giant Dragon” und “GL IIXII”.
PRC
The People’s Republic of China
PRM
Pacific Retail Merchants AG
PRM Group
Pacific Retail Merchants AG and its wholly owned subsidiaries, Giant Luxury
Holdings Limited, Hong Kong and its Operating Subsidiaries Hing Lung
G-1
Medicine”, “Universal Medicine”, “Dah Sing Bird Nest”, “Yue York Medicine”,
“Giant King Medicine”, “Giant Royal Medicine”, “Giant Top Medicine”, “Giant
Ocean Medicine”, “Giant Emperor Medicine”, “Giant Channel Medicine”, “Giant
Dragon” und “GL IIXII”.
Prospectus
This document
SAR
Special Administrative Region, which reflects the status of Hong Kong to PRC
TCM
Traditional Chinese Medicine
TEUR
Thousand Euro
VEM
VEM Aktienbank AG,
G-2